DVD Sales Trend More Than Hollywood Hype

The 250 guests in their black-and-white finest will be ushered down a red carpet to a chilly screening room where popcorn buckets await them.

Yet the waddling-room-only crowd of penguins will be snacking on anchovies. The stunt Thursday at Sea World in Orlando, Fla., is aimed at commemorating the DVD release later this month of 20th Century Fox’s hit animated film “Ice Age.”

The real purpose: Film at 11.

“What TV station wouldn’t want to run that?” said Fox Home Entertainment President Pat Wyatt.

For consumers, DVD is beginning to seem as if it stands for deja vu-ed. With the biggest block ever of summer movies being released this quarter on disc, and with 45 million DVD players now in homes, studios can mint more money from a film’s DVD release than they do from the box office.

As a result, many of the same marketing and distribution strategies and gimmicks used to “open” a film are being recycled to “open” a DVD.

Tuesdays have become the weekly D-day for home entertainment executives and their DVD releases, much like Friday is for their studio counterparts who release films into theaters. Executives nervously await results like politicians scanning early election returns so they can proclaim victory. Called the “street date,” Tuesday gives retailers time to prepare for the weekend rush.

Today, it’s “Spirit: Stallion of the Cimarron.” Last week saw “Star Wars: Episode II -- Attack of the Clones.” Next week comes “Men in Black II.”

Among the movies being jammed into stores this quarter are “Scooby-Doo,” “The Scorpion King,” “Spider-Man,” “Austin Powers in Goldmember” and “Lilo & Stitch.”

Some are revamped versions of previously released DVDs. A “platinum edition” of “Lord of the Rings: The Fellowship of the Ring,” released last week, includes 30 additional minutes that aren’t in last year’s film or the DVD version released three months ago.

The proliferation of releases among fierce competitors has caused ad budgets to swell at times to well above $20 million, two to four times what a studio once might have spent to advertise a movie on videocassette.

Just as they flood theaters with thousands of film prints, studios now jam the aisles of Wal-Mart, Best Buy, Blockbuster and other stores with as many as 25 million copies of big hit films on disc. And just as they boast about setting box-office records, studios splice and dice DVD sales numbers in the first day or two to claim bragging rights.

“It’s important to push through as many sales as possible at stores so they can make room for the next new releases,” said Ben Feingold, chief of Sony Pictures’ Columbia TriStar Home Video unit, which just released “Spider-Man” and soon will follow with “Men in Black II.”

Driving the trend is more than the usual Hollywood hype. The DVD explosion is so profitable it has become one of the few bright spots for the media industry, which has seen profits and stock prices languish.

DVDs now are being shipped by studios at about twice last year’s pace. The 425.6 million shipped through September in North America eclipsed last year’s total of 364.4 million. With DVDs the driving force, overall domestic home video revenue is expected to climb to $23 billion next year, according to Salomon Smith Barney projections. That’s nearly three times the projected box-office total and up 23% from last year.

Discs have some distinct economic advantages. DVDs are cheaper to make than videocassettes, with manufacturing costs of about $1.10 compared with about $1.75 for VHS versions. Overall profit can be about $12.50 a DVD, compared with about $9.25 for a VHS tape.

“DVD is the largest source of additional revenue and profit ever created in entertainment in such a short period of time,” said Warner Bros. home video chief Warren Lieberfarb, widely regarded as the godfather of the genre. “It’s driving the growth in the movie industry.”

Unfortunately, some executives say, the emphasis on early sales results comes at the expense of a disc’s long-term sales potential. One week, a DVD can be on display in a store’s prime location, such as near the checkout aisle or in a stand-alone display. But when the next big release comes along, the title could end up in “the dead zone” or “in line,” nicknames for the rows of bins in which all the other DVDs are stacked.

“When you evaluate DVDs like a feature film, with the first week of sales compared to the instant box-office numbers, it sends the wrong message about our product,” said Matt Lasorsa, senior vice president and head of marketing with New Line Home Entertainment. “A film will be in theaters four or five weeks. We’re going to be on shelves for years.”

Still, studios are doing whatever it takes to highlight their DVD sales to downplay the problems in such other important divisions as movies, television, Internet and theme parks. Film companies such as MGM Inc. sell themselves to investors on the strength of the thousands of potential DVDs in their film vaults.

Walt Disney Co.’s earnings this month showed operating income falling at three of its four divisions.

The lone standout was its movie studio, thanks largely to DVD sales of “Monsters, Inc.,” “Snow White and the Seven Dwarfs” and a “Cinderella” sequel, all of which helped offset a drop in Disney’s worldwide theatrical business.

Sony Pictures’ “Spider-Man” DVD rang up more than $190 million in sales in its first weekend, compared with its opening weekend box-office record of nearly $115 million. The vast majority of that $190 million -- possibly as much as $160 million, rivals estimate -- finds its way to the studio.

That’s because many retailers sell hot DVDs for almost no profit, or even at a loss. Nonetheless, retailers say the rotten margins are worth it because a DVD release has become one of the most effective ways to lure people into their stores to buy other things.

“There’s no doubt that for us it drives both our rental and retail traffic,” said Nick Sheperd, executive vice president and chief concept officer for video giant Blockbuster Inc.

Video divisions are increasingly borrowing from the playbook of the movie side by using showmanship to get people’s attention. Among the schemes: the penguin screening; cancan dancers on Hollywood Boulevard to mark the release of “Moulin Rouge”; commemorative bookends for the special edition of “Lord of the Rings: The Fellowship of the Ring”; and a fiery reenactment on Sunset Boulevard of a scene from “The Scorpion King.”

They also are reaching to claim new records.

On Nov. 3, for instance, Sony Pictures announced that it had shattered records by selling 7 million “Spider-Man” DVDs and videocassettes on the first day. Eleven days later, Fox proclaimed that in the “first 24 hours” of release consumers made “Star Wars: Episode II -- Attack of the Clones” “the fastest-selling home entertainment release of the year.”

In many cases, it all depends on how one defines the record. Some studios count DVDs shipped to retailers but not necessarily sold. Others pump up results by including advance orders.

Of course, with the number of DVD players in homes growing exponentially, it’s only natural that records keep falling. “We have a growing market,” said Kelley Avery, head of home entertainment worldwide for DreamWorks. “That’s why we’re seeing the increasing numbers.”