Movies on DVD

INDUSTRIAL CODES

NAICS: 33-4613 Magnetic and Optical Recording Media Manufacturing, 33-4612 Prerecorded Compact Disc (Except Software), Tape, and Record Reproducing, and 51-2110 Motion Picture and Video Production

SIC: 3695 Magnetic and Optical Recording Media Manufacturing, and 7812 Motion Picture and Video Production

NAICS-Based Product Codes: 33-46120301, 33-46130211, 33-46130213, 51-211032030, 51-211039000, 51-211039036, 51-211031994, and 51-211032032

PRODUCT OVERVIEW

A DVD is a disc, approximately 4.72 inches in diameter, used to store digitized audio, video, or photos. The DVD was introduced in the 1990s as the next generation in optical storage and ultimately as a replacement for compact discs (CD). A DVD is similar to a compact disc; they both have approximately the same dimensions and they are created in much the same way. An optical disc has millions of pits arranged in a spiral from the center to the outside of the disc. These pits are arranged into tracks. The area between the pits is called a land. The lands and pits represent the zeros and ones of digital information. A laser in the CD or DVD player then reads the digital information on the disc.

In 1997, inventors of the DVD were able to reduce the pit length on a CD. They also created laser technology that could read these smaller bumps. In short, the inventors increased the density of the pits which allowed more information to be stored on an optical disc. A single sided DVD now holds seven times the capacity of a CD. A double-sided, double-layer version can store approximately 24 times as much information as a standard CD. In May 1997 the first DVDs and DVD players appeared on the market.

The abbreviation DVD originally stood for Digital Video Disc, however, some members of the industry felt that DVD should stand for Digital Versatile Disc, because of the device's many non-video applications. No consensus has ever been reached.

Broadcasting Specifications

Any read-only DVD, regardless of its content, is a DVD-ROM (read only memory). The DVD-Video format was initially created as a means for the motion picture industry to distribute its films on pressed disc. The disc has some advantages over other recording media. A DVD disc will not wear out after repeated viewings; video home system tapes (VHS tapes), used in Video Cassette Recorders (VCRs), do deteriorate with use. A DVD offers more storage capacity than a CD or a laserdisc, a popular movie format in the 1980s. It also offers greater picture resolution.

A video image consists of a number of vertical and horizontal display lines. For analog television sets in the United States, the maximum number of vertical lines is set to 525 by the National Television System Committee (NTSC). The number of horizontal lines varies. The more lines in the image, the sharper it is. Movies distributed on DVDs display 480 lines, while movies on laserdisc display 425 lines.

In addition to the United States, Mexico, Canada, Japan, South Korea, and the Philippines use the NTSC standard. The Phase Alternating Line (PAL) format is used in most of Europe, parts of Africa and South America, and Australia and New Zealand. Sequential Color with Memory (SECAM) is used in France, Russia, Eastern Europe, and parts of Africa. These formats all may have different video specifications and the formats are not compatible—a NTSC coded disc will not work in a PAL DVD player, for example. These standards refer to analog television broadcasting; high definition television broadcasting has different standards.

Regional Codes

DVD discs also contain DVD region codes, which indicate the country or region in which the disc is to be played. The codes are intended to help studios control the distribution aspects of a film—content, release date, and price. More than one code may be assigned to a disc. Blu-ray discs, the next generation of DVDs, has a different set of codes. There are eight different regional codes for DVD-Video discs:

• 0—Informal term meaning playable in all regions
• 1—Bermuda, Canada, United States, and U.S. territories
• 2—The Middle East, Western Europe, Central Europe, Egypt, French overseas territories, Greenland, Japan, Lesotho, South Africa, and Swaziland
• 3—Taiwan, Hong Kong, Singapore, South Korea, Philippines, Indonesia, and Malaysia
• 4—Australia, New Zealand, Pacific Islands, Mexico, Central America, South America, and the Caribbean Islands
• 5—Russia, Eastern Europe, Mongolia, India, All of Africa not in Region 2, North Korea
• 6—China
• 7—Reserved for future use, but found in use on protected screener copies of MPAA-related DVDs, and "media-copies" of pre-releases in Asia
• 8—Aircrafts, cruise ships, and similar venues

A commercially produced DVD movie is encoded using MPEG-2 compression technology, a broadcast industry standard, and a variety of other multi-channel technologies. It allows text (the menu or guide interface on a DVD, for example) to be added to the audio and video signal. The speed at which data is processed in a DVD movie can vary but tends to be 3-10 megabits per second (Mbit/s).

MARKET

Motion Picture Industry

The United States is the leading provider of filmed entertainment in the world. More than $9 billion in tickets were sold in the United States in 2006. When other film revenue sources are included, Datamonitor estimates the entire industry was worth $38 billion for the year. According to Census Bureau data, there were 15,908 firms engaged in motion picture production, distribution, and services in 2004. These firms employed 282,712 people in 2004, the second year of employment increases since 2002. However, some sectors of the motion picture industry have shown sharp declines, particularly in the areas of distribution and post-production. Large studios began to consolidate in the 1990s. Some large studios developed their own distribution and post-production departments. During this same period, the number of small, independent studios outside Hollywood began to increase. Most of these smaller studios, unlike their larger competitors, worked with contractors for support in both distribution and post-production services.

The Start of the DVD Market

The origins of the DVD movie market can be traced back to Warren Lieberfarb, president of Warner Home Video. He was interested in the creation of a media product similar to the compact disc on which to distribute motion pictures. In 1995 the studios agreed to the DVD standard. In 1996 the first DVD players went on sale in Japan; they were available in the United States by 1997.

Warner Bros. and a few affiliated labels conducted some initial tests, shipping DVDs into selected markets to see how they would perform. In August 1997 Warner Bros. began distributing DVDs nationwide through retailers such as Best Buy, Tower Records, and others. During this period major studios all formally announced they would support the DVD and would release their titles on the format. DreamWorks was the last major studio to agree; by August 1998 all the major film studios were releasing their movies on DVD.

At the end of 1998 an estimated 1.4 million U.S. households had a DVD player and approximately 23 million DVDs were sold that year. DVD media was making inroads into the large recording media market generally, a market hitherto dominated by CDs and magnetic tape formats. At the end of 1998 computer makers announced shipments of 6 million personal computers with DVD drives.

Approximately 349,000 DVDs were sold in 1997, the first year in which movies were made available on DVD, according to the Consumer Electronics Association. From January to October of 2002, sales reached approximately 130.3 million, according to ACNielsen Videoscan. Some of the industry's growth would be helped along by popular, big budget films such as Titanic (the first DVD to sell over 1 million units) and The Matrix.

Figure 149 shows spending on DVDs doubling between 1999 and 2000, from $1.5 billion to $3.1 billion. By 2002 spending on DVDs was outpacing spending on VHS tapes. In the early 2000s DVD was the dominant format for motion picture distribution. By the end of 2007 DVD spending was expected to reach $23.7 billion. The VHS format continued to lose sales, market share, and presence on retailer shelves. According to industry estimates, VHS spending is forecast to fall from $8.7 billion in 2002 to $100,000 in 2007.

DVD Costs

In the early 2000s most spending was at the retail level rather than at the rental level. This is a significant shift in the industry. When the home video market first developed in the late 1970s and into the 1980s, studios charged video rental stores up to $100 per VHS tape. Rental stores would then try to rent the tape as many times as possible to recoup their investment and hopefully turn a profit. By the 1990s studios were selling the tapes for far less but had worked out agreements with retailers to share in rental revenues. Consumers were much more likely to rent rather than purchase a VHS movie.

The relatively modest cost of a DVD has changed consumer behavior. The average price of a DVD in 2002 was $21.02 according to the Digital Entertainment Group. The price dropped to $19.96 in 2004. This drop in cost prompted many consumers to purchase their favorite movie for their home collection. Some people buy movies just to see one they are curious about, instead of going to see the film at a movie theater. Indeed, that $20 DVD price is close to the cost of a movie ticket and trip to the concession stand in some major cities. The price of an average DVD rose to $22.40 in 2006. Studios have recognized the popularity of the medium and are loading extra content onto the DVD—interviews, extra footage, and commentaries. The extra content and increased production and marketing costs are reasons for the price increase. According to 2005 estimates by MGM, approximately half the cost of a DVD movie involves production, advertising, distribution, and related costs; the other half is profit.

Most spending on DVDs is for new titles, with the balance of spending divided between catalog or older titles and television titles. What is the best selling genre? According to Market Share Reporter 2007, comedy titles represented 26.3 percent of DVD sales in 2005. Action/adventure titles represented 15.9 percent, family titles another 14.2 percent, and dramas 14 percent. Children's titles, science fiction and horror also sold well. As of 2006, there were about 68,000 titles on the market.

KEY PRODUCERS/MANUFACTURERS

Warner Home Video

This company led the U.S. home video market in 2006 with revenues of $4.26 billion, 18.1 percent of the market, based on sales and rental of DVD and VHS formats through December 31, 2006. Its top grossing film of the year was Harry Potter and the Gobletof Fire. This movie sold 10.1 million copies and was the fourth best-selling title of the year. Warner Home Video is a division of Warner Bros., one of the largest film and production companies in the world. Warner Home Video was founded as WCI Home Video (WCI stood for Warner Communications, Inc.) in 1978. The re-naming took place in 1980. Warner Home Video released the movie Twister on DVD in 1997, making it one of the first studios to become involved in the new format.

Buena Vista Worldwide Home Entertainment

Buena Vista was the second largest player in the U.S. home video market. It generated $3.66 billion in DVD and VHS video revenues and took 15.1 percent of the market. The company is the distribution arm of Buena Vista Pictures Distribution, which is owned by the Walt Disney Co. Prior to 1953, Walt Disney films had been distributed by United Artists or RKO Radio Pictures. In 1953 the Walt Disney Company formed the new distribution company after a dispute over the value of its True-Life Adventures series with its distributors. Buena Vista was the distributor of the best-selling DVDs of 2006: Pirates of the Caribbean: Dead Man's Chest, The Chronicles of Narnia: The Lion, The Witch and the Wardrobe, and Cars. These titles sold 14.4 million, 13.5 million and 11.4 million copies, respectively. It also distributed The Little Mermaid Special Edition, which was the tenth best-selling DVD of the year with sales of 6.4 million units.

Twentieth Century Fox Home Entertainment

This company had $3.24 billion in sales and rental revenue, equal to 3.4 percent of the market in 2006. The company is a division of Twentieth Century Fox Film Corporation, which was founded in 1935. Its library includes All About Eve, Planet of the Apes, and Butch Cassidy and the Sundance Kid. Its top selling titles in 2006 were Ice Age: The Meltdown and Walk the Line. These two titles sold 7.3 million and 7.1 million copies, respectively.

Sony Pictures Home Entertainment

Sony Pictures generated $2.97 billion in sales and rental revenue, making it the fourth leading company in the market in 2006. The Da Vinci Code was its best-performing title, ranking ninth on the list of the year's best renting and selling titles. The company is a subsidiary of Sony Corp. It was founded in 1978 as Columbia Pictures Home Entertainment. The Sony library is an impressive one, holding titles from Sony Pictures, Columbia Pictures, TriStar Pictures, and a number of smaller studios. In 2005 it acquired the rights to MGM's 4,000-film library and 10,400-TV episode library. These titles, however, are still distributed under the MGM DVD label.

Universal Studios Home Entertainment

This studio was the fifth largest in 2006, with sales of $2.66 billion. The company is a division of Universal Studios and was founded in 1979. The Universal library includes such classics as ET: The Extra-Terrestrial, The Deer Hunter, Jaws, and American Graffiti. King Kong was its best performing title of 2006, with sales of 7.6 million units.

The other leading studios producing movies on DVD include Paramount, Lionsgate, Dreamworks, and MGM. In 2006 they generated DVD sales and revenues of $2.66 billion, $2.28 billion, $761 million, and $534 million, respectively.

MATERIALS & SUPPLY CHAIN LOGISTICS

How a DVD-Video Disc is Made

DVD production varies depending on the format. If a disc is single-side, then it is composed of a recording side and a dummy side. A double-sided disc will use two recording sides. The first step in creating a DVD-Video is to create a source master. The source master contains the MPEG-2 encoded video, audio, and any other data the studio decides to include on the DVD such as subtitles and navigation menus. The data from the source master is transferred to a glass master—a mold from which the copies will be pressed—using a laser. The data from the source master becomes pits and lands in the glass master. Then, the glass master is pressed against a layer of nickel, transferring the pits and lands. Next, this layer is molded onto a polycarbonate disc. DVDs have two layers of polycarbonate discs that are bonded together.

The disc also has a layer to protect the disc against scrapes or dirt. Information on the disc is kept in the disc and not at the surface, which provides an additional layer of protection. The disc sides are bonded together using a hot melt, UV (ultra-violet) cationic or free radical process. The surface layer may have an additional decorative layer applied using screen-printing methods. These various layers may be composed of silver, silver alloy, silicon dioxide, germanium, zinc sulfide, and other materials. In the case of single-sided discs, the dummy side of a disc is generally made of plastic polycarbonate.

The DVD Supply Chain

The DVD supply chain consists of: the owner of the content (typically a movie studio), the replicator or media stamping contractor, the transporter (a trucking or logistics firm), the distributor, and the retailer. Many media companies have their own distribution departments. Smaller companies typically need a third party distributor.

According to one industry estimate, 50 percent of the sales of the average newly released movie on DVD takes place in its first week on the shelves, with another 30 percent in weeks two through four and the last 20 percent over the rest of its lifetime. Suppliers and retailers must work together to get a DVD to the store in a timely manner and in sufficient quantities. Many industry insiders are pushing for the increased use of Radio Frequency Identification (RFID) tags. RFID tags are encoded with information that help stores track sales and manage inventories. An RFID tag can be used to track a product all the way through the supply chain. The RFID can also be used in customer service functions as well. For example, the RFID may be used in a store kiosk with which a customer can determine the exact location of store merchandise and have any product warranties waiting for them at the store checkout moments later. Such tags serve other purposes as well; a defective DVD might be tracked to its original source and the rest of the shipment pulled from store shelves, for example. In 2006 Best Buy implemented a test program in one of its stores and saw an 18 percent increase in revenues and 14 percent increase in units sold. Wal-Mart uses RFID tags in 500 store locations. However, RFID tags for DVDs are used in only ten of these stores. Furthermore the tags are used only at the warehouse.

DISTRIBUTION CHANNEL

The Manufacturer

DVDs used in the distribution of movies are made through DVD replication equipment, which can produce a pressed disc ready for shipment in seconds. The technology was originally used to produce compact discs; the new DVD format requires little change to the machinery. DVD replication equipment is used to create glass masters and metal stamping masters. It is used to stamp substrates in hydraulic molds and apply reflective layers. The equipment also bonds substrates together, prints labels, and inserts discs into packages. Most replication plants will run a small number of discs, perhaps one to a hundred, to make certain there are no errors with the discs before discs are mass produced.

Some movie studios such as Warner Bros. or Sony are large enough to engage in DVD manufacturing and duplication in-house or through subsidiaries. Sony DADC, a subsidiary of Sony Corp., is one of the largest DVD replicating companies in the world. In the duplication process, the manufacturer provides the replicating company with the master disc, label design, and possibly graphics and promotional materials. If this process is kept in-house, it helps smooth the overall DVD production process. Studios also benefit from having well-developed distribution networks to get these discs to retailers.

Some studios contract out their DVD manufacturing. Technicolor was the largest independent distributor of DVDs and CDs in 2007; it replicated 1.7 billion DVDs and 175 million CDs. Technicolor and Cinram are the major replicators for the Hollywood studios.

In 2007 the major studios were split in their support of the next generations of DVD technology: HD-DVD and Blu-Ray. Some studios announced that they would only release their movies on HD-DVD and others announced they would only release movies on Blu-ray disc. By the middle of 2007, the home video market was at an impasse. Manufacturing costs may help determine which format will become the industry's new standard. DVD replication machines require more modification to produce Blu-ray discs than to produce HD-DVD discs; this ultimately makes the discs more expensive for the manufacturer to produce.

When the DVD movie first came to market, they were available to rent through the local video store and to purchase through a retailer. These are still the two primary channels for consumers to obtain DVDs. However, the distribution of DVDs and movies has changed considerably since the 1990s.

The Video Store

As stated, with the VHS medium, video stores were charged up to $100 per tape and then had to rent the tape as much as possible to recoup their investment. Most retailers could only afford to purchase a few copies of popular titles. Consumers frequently complained about the long wait to rent such titles. In 1998 Blockbuster and other video chains entered into revenue sharing agreements with their suppliers. Under such an agreement, a supplier charges a retailer a wholesale price per unit plus a percentage of the revenue the retailer generates from the movie rental. Under the old arrangement, the retailer paid the high tape price and kept all revenues. The new agreement lowered the price considerably, but half the revenues went back to the studio. The revenue sharing agreement included both the VHS and DVD format.

Netflix

In 1997 Netflix founders Reed Hastings and Marc Randolph decided to start a company that rented movies by mail. The rent-movies-by-mail plan was not feasible while movies were only available on bulky video tape. However, the DVD, which had just come on the market was small and light and could be shipped through the mail. The two men conducted tests to determine how quickly the DVD could be shipped through the U.S. Postal Service and to determine the most suitable means of packaging DVDs to minimize damage to the disc in transit. Netflix opened in 1998 with 30 employees. It offered 928 titles. As more titles became available on DVD, the company's catalog expanded.

Online video rental has become very popular. Customers who rent movies through the site no longer have to deal with late fees or go back to the store to return the movie. Movie rental sites have various subscription plans to accommodate the needs of the renter. Netflix had 6.3 million subscribers and a library of 70,000 titles at the end of 2007. It ships an estimated 1.575 million DVDs each day. The company has 42 distribution centers across the United States and employs 1,300 people. Blockbuster launched its own online site and has been stealing customers from Netflix. In the first quarter of 2007, Netflix added 480,000 new subscribers while Blockbuster added 780,000. In the second quarter, Neflix lost 55,000 customers while Blockbuster added 525,000. As of the middle of 2007 Blockbuster had 3.6 million subscribers and a library of more than 70,000 titles. According to Netflix there will be approximately 12 million online DVD renters in the United States at the end of 2007.

The DVD distribution industry has been affected by the Internet in other ways as well. Consumers can purchase and download DVD-quality television programs, movies, and other video content to play on their computers. The films are usually available for purchase on the same day that they arrive in the stores.

Apple found great success with music downloads since it launched the iPod in 2001. In January 2007, the company made video content available for download on its iTunes web site. Users may keep the video on their computer hard drive or transfer it to their iPods to watch. Amazon.com launched its Unbox service to compete with iTunes in September 2006, but the programming on its site is coded with Microsoft Digital Rights Technology, which means downloaded video can not be played on Macintosh computers or iPods. Netflix began offering streaming video of approximately 1,000 titles on its site in early 2007. By the middle of that year Netflix reported that its subscribers had downloaded 5 million movies and television shows using this newly offered digital, streaming video service.

Many of these sites also offer streaming video for rental as well. A user downloads a film and then is issued a license to view the film for a specific amount of time, such as one day, seven days, or a month. Wal-Mart launched a downloading site in February 2007. It created a stir in the motion picture community by undercutting the prices charged by iTunes. It has also worked out deals with all the film studios. Apple's iTunes only has deals with Disney and Paramount. Amazon has deals with Lions-gate, Warner Bros., Fox, Paramount, MGM, Sony, and Universal.

According to the Entertainment Merchants Association Annual Report, mass merchandisers had a 43 percent market share of DVD sales in 2006. Mass merchandisers include stores such as Target and Wal-Mart. Consumer electronics retailers such as Best Buy or Circuit City had 16 percent of sales. Online retailers represented 12.5 percent of sales. Blockbuster Video is still the king of video rentals. It represented 43 percent of the movie rental business. Online rental stores had 16 percent of the market. Other movie rental stores had 39 percent of the market.

KEY USERS

DVDs are the primary media for distributing movies, software, and other audio and visual products. Because of this, most people are the key users of this technology. One way to measure the number of users is to look at the speed with which DVD players have entered our homes; the DVD player is regarded as the most rapidly adopted consumer electronics product in history. According to Nielsen Media Research and Adams Media Research there were 95.7 million households with DVD players in the United States at the end of 2006. Approximately 86 percent of households with television sets had DVD players in 2006, this is a 31 percent increase from 2002 when approximately 51 percent of households with television sets had DVD players.

The average U.S. household with a DVD player purchased 18 DVDs and rented 23 DVDs in 2005, according to the Video Software Dealers Association. Worldwide, the average rental rate for households with a DVD player was slightly more than 6 DVDs annually. An estimated 81.2 percent of U.S. homes have at least one DVD player. More homes have DVD players than VCRs. The DVD player rate surpassed the rate for VCRs for the first time in 2006—81.2 percent compared to 79.2 percent. The television is still the king of the consumer electronics mar-ket. It was in more than 98 percent of American homes in 2005.

Buyer Demographics

Centris conducted a study of DVD buyers in 2003. They found that 16 percent of buyers of DVDs that year were between 18 and 24 years of age; 27 percent were between 25 and 34 years of age; 25 percent were between 35 and 44 years of age; and 26 percent were 45 years old and over. Sixty-one percent of DVD buyers were Caucasian, 14 percent Hispanic, and 12 percent African-American. Forty-two percent were college graduates or had some college education. Seventy-two percent were employed. Fifty-six percent were married, 28 percent single, and 12 percent widowed.

ADJACENT MARKETS

The segments of the consumer electronics industry are connected. The prices of televisions, DVD players, sound systems, and similar entertainment devices declined in the early 2000s. This allowed many consumers to build home entertainment centers, which can offer picture and sound quality that rivals that of the local movie theater. Outfitting these home theaters with a library of movies has become a reasonably feasible undertaking in the first decade of the twenty-first century, in terms of both cost and the space necessary to store such a library. In 2006 it was more economical for a family of four in the United States to purchase a newly released movie on DVD than to see that movie in a movie theater, an important factor in the strong sale of movies on DVD.

Attendance at movie theaters was falling in the early 2000s. There were 1.45 billion movie tickets sold in the United States in 2006. The figure is up slightly from 2005 but down from 1.6 billion in 2002. Some of the decline comes from consumer interest in DVDs. Other reasons include high ticket prices, lack of blockbuster films, and demographics.

Studios often release movies on DVDs with extra content such as deleted scenes and film commentaries. The package may include collectible postcards and figurines. More than a few consumers have complained about the marketing efforts of some studios. A collector's edition is released months after a film is initially released on DVD, offering some additional disc content and some eye-catching packaging. Devoted fans are encouraged to buy this disc in addition to the copy they initially purchased. These multiple copies and sales help drive overall industry sales.

Consumers purchased 33 million DVD players in 2006. Since 1997 Americans have purchased more than 200 million DVD players. An estimated 88 million U.S. homes have more than one. In 2006, the high-definition (HD) industry expanded considerably in the United States—the format has actually existed since the 1970s. In the HD format, the broadcast signal has twice the number of scanning lines per frame as is visible on a standard television set (1,080 lines compared to 480 lines). This allows for a more detailed picture. The increased interest by consumers in 2006 stimulated sales of high-definition televisions, video game consoles, DVD players and DVDs.

The television industry had sales of $9.8 billion for the first 10 months of 2006. Again, new digital technology has helped drive sales. According to the Consumer Electronics Association, 3.4 million digital sets were sold in the United States during the first quarter of 2006, an increase of more than 100 percent from the same period in 2005. Thirty-five million digital televisions have been sold in the United States since 1998.

RESEARCH & DEVELOPMENT

Although DVDs had been on the market for a decade by the latter half of the first decade of the 2000s, next-generation formats were already appearing. The high-definition industry gained a foothold in the American electronics market in 2006, which translated into increased sales of high-definition televisions, DVD players, and discs. This industry is still in its infancy, and neither the public nor electronics makers have embraced the Blu-ray or the HD-DVD format. An alternative might be the Forward Versatile Disc (FVD), developed in Taiwan. It is a less expensive competitor of the high-definition disc. It is manufactured like a regular DVD and uses a red laser, but track width has been shortened slightly to allow the disc to have 5.4 gigabytes (GB) of storage per layer as opposed to the standard 4.7 GB.

The Holographic Versatile Disc Alliance was formed in 2005. Its technologies combine single beam holographic storage and DVD technologies to provide disc capacities starting at 500 GB, or ten times the capacity of a two-sided Blu-ray disc. The HVD Alliance has not yet brought any products to market.

Another new development is a protein-coated disc technology. In 2006 Professor V. Renugopalakrishnana and his colleagues at Harvard Medical School coated a disc with light-sensitive proteins called bacteriorhodopsin. These proteins enter into an intermediary state when exposed to light, which acts as a binary system. Renugopalakrishnana and his colleagues were able to alter the DNA of the protein and prolong this state for several years. This disc could hold up to 50 terabytes (50,000 GB). It was unclear in the latter part of the first decade of the twenty-first century when (if ever) this disc would be available.

CURRENT TRENDS

Movie Studios and Theaters

The United States is the leader in the motion picture industry. American films are enjoyed throughout the world, but the cost of producing a film is substantial. According to the Motion Picture Association of America (MPAA), the average cost of an MPAA film to make and market was $100.3 million in 2006. A motion picture once made money primarily during its theatrical run. In the twenty-first century, home video is the major source of revenues for studios. According to the MPAA, approximately 55 percent of a film's revenues were generated at the theater in 1980; the rest were made through television broadcast rights and through pay television and video markets—markets that in 1980 were just developing. By 1985 the theatrical run represented approximately 25 percent of total revenues. By 2000 the share had dropped to 19.5 percent.

Recognizing this, studios have been pushing for a shorter window of time between a film's release in the theater and DVD. A film was once released on DVD and video six months after its theatrical run; by 2005, that window had shrunk to four months. Many consumers wait to see a film at home, where many have entertainment systems that match—or rival—the theater experience. In 2007 some studio executives contemplated releasing films on DVD and at the theater simultaneously.

Battle for Next Generation Formats

Blu-ray, also known as Blu-ray Disc, is one of two new DVD formats vying for a leadership role in next generation of DVD formatting. The Blu-ray format was developed by the Blu-ray Disc Association (BDA). The BDA includes electronics, personal computer, and media manufacturers such as Apple, Dell, Hitachi, Hewlett-Packard, JVC, LG, Mitsubishi, Panasonic, Pioneer, Philips, Samsung, Sharp, Sony, TDK, and Thomson. The format was developed to enable recording, rewriting, and playback of high-definition video, as well as storing of large quantities of data. The format offers more than five times the storage capacity of traditional DVDs and can hold up to 25 GB on a single-layer disc, twice this amount on a dual-layer disc.

Most recordable media uses a red laser to read and write data. The Blu-ray, however, uses a blue laser. It is this distinction which gives Blu-ray its name. Blue lasers have a shorter wavelength than red lasers (405 nanometers compared to 650 nanometers). This allows data to be packed more closely together on a disc. This also helps the laser focus with greater precision. Blu-ray discs spin about a time and a half the normal rate, which aids in faster data transfers and higher quality audio and video.

More than 180 of the world's leading consumer electronics companies support the Blu-ray format. Movie studios that support this format include Disney, Fox, Warner, Paramount, Sony, Lionsgate, and MGM. Disney, Fox, Sony, Lionsgate, and MGM release their movies exclusively in the Blu-ray format.

The high definition or HD-DVD format is the format which competes with Blu-ray. HD-DVD discs arrived on the market before Blu-ray discs. An HD-DVD disc is similar to a regular DVD in construction. It can be read with a red laser, although it was designed to read with a blue violet laser like its Blu-ray competitor. An HD-DVD can hold eight hours of high-definition video on a dual-layer, single-sided disc. Single-layer disc capacity is 15 GB; dual-layer capacity is 30 GB. Like Blu-ray, the HD-DVD disc has its own prominent supporters including Microsoft, Intel, NEC, Sanyo, and Toshiba.

Because there is no standard high-definition DVD format and because the price for Blu-ray and HD-DVD players, and the high-definition televisions needed to accompany them is higher than standard DVD players and analog televisions, consumers seem to be adopting a "wait and see" attitude. Consumers do not want to invest considerable money in technology that may be forced from the market. A typical HD-DVD player priced at approximately $500 in 2007, and a Blu-ray player was priced at $1,000. The first DVD player designed to read both HD-DVD and Blu-ray discs arrived on the market in February 2007. It was priced at $1,200. A big screen, high-end HD can cost more than $6,500. Once a high-definition standard reaches the marketplace, however, the cost of such devices will likely fall.

The HD-DVD format seemed to have had the upper hand in the market place as of June 2006. It had a 70 percent market share. Blu-ray had the remaining 30 percent. But, Blu-ray has had the leading market share since January 2007, according to ACNielsen VideoScan. Blu-ray had a 60 percent market share of DVD sales from 2001 to July 2007; HD-DVD had 40 percent.

TARGET MARKETS & SEGMENTATION

The public quickly embraced DVD technology when it arrived in the late 1990s. The DVD movie is relatively inexpensive and, as a result, millions of Americans have built home libraries of their favorite films. The product has sparked sales and innovation in related categories. New high-definition DVD formats came to market in 2006 and generated great consumer interest. The interest in high-definition broadcasting will stimulate sales of next generation DVDs, DVD players, televisions, and related equipment. Media analysts Informa Telecoms and Media estimated that 48 million households worldwide had high-definition televisions at the end of 2006.

RELATED ASSOCIATIONS & ORGANIZATIONS

Blu-Ray Disc Association, http://www.blu-ray.com

DVD Forum, http://www.dvdforum.org

International Recording Media Association, http://www.recordingmedia.org

Optical Storage Technology Association, http://www.osta.org

Video Software Dealers Association, http://www.vsda.org

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Hafner, Katie. "Humans Regain Jobs From Mice." New York Times. 16 August 2007, C1.

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see also DVD Media, Televisions