Black Box Smash Reminder of Video Business Challenge

To the home video industry, there is no greater Satan than the black box. That’s the electronic device that can allow certain unscrupulous viewers to filch TV signals and get movies for free.

The Video Software Dealers Assn., or VSDA, an Encino-based industry trade group, says the devices are proliferating, robbing both video retailers and cable companies of revenue during a time of critical technological change. So the association decided to drive home the point this week at its 15th annual Home Video Entertainment Convention and Exhibition at the Los Angeles Convention Center.

Donning a hard hat, VSDA President Jeffrey P. Eves ended a Thursday news conference about the black-box problem by whacking at one of the evil devices with a sledgehammer. Take that! Eves grinned for cameras as circuits and chunks of metal flew apart.

Of course, sledgehammers won’t quash the various problems facing the video industry, now entering an uncertain adulthood after a heady adolescence.

From a certain standpoint, video nabobs have little to worry about--at least for the moment. Theirs is a $16-billion industry, after all, and there’s still plenty of money to be made. Video now makes up 57% of all revenue generated by the movie studios. That’s an eye-catching figure, especially when contrasted with the initial video paranoia that seized studio executives 15 years ago.

But, after a decade of explosive growth, retailers and manufacturers are facing some nagging doubts. They’re especially antsy about digital satellite and new pay-per-view options, which they worry might lead consumers to hit the “pause” button on their VCRs and adopt more convenient ways of getting movies.

The big merchants, like Viacom Inc.’s Blockbuster Video unit, have pretty much tapped the U.S. market and are now looking overseas for growth. Wall Street has been glum about the future of the business, given that 87% of U.S. TV households already own at least one VCR. Consolidation is eating up smaller players.

The industry has been trying to line up behind digital videodiscs, which look like CDs but can also hold movies and computer data, but the launch has been delayed indefinitely by copyright problems and halting studio acceptance. Videodisc hardware will probably not hit stores until the very end of this year, if then.

Most ominously, video rentals declined by about 3% last year, though retailers say business has been picking up again lately.

One of the convention’s goals, it seems, is to counter negative speculation with a mix of persuasion and, yes, sledgehammers.

“It isn’t reasonable to expect that in the future we will see double-digit growth rates” for video rentals, Eves said in an interview. “But maturity should not be equated with disappearance. Tens of thousands of mature businesses in this country still make profits, fend off new competitors and are the cornerstones of our economic society. Video will just be more vulnerable than it has in the past to the vagaries of production and distribution and overall economics.”

So the industry has gone on the offensive, launching an ad campaign to fight black-box use and demanding that studios extend the so-called window of time between a film’s video release and its availability on pay-per-view. The association is hoping that awareness of copyright law will discourage consumers from buying black boxes. Eves announced a new annual award--this year to MGM/UA--for the major studio scheduling the longest window between video and pay-per-view release.