Boom in Music DVD on the horizon

Universal Music is the largest music company in the world with superstar artists from Eminem to Pavarotti. But it operates in a market environment where increased CD burning is a significant challenge while, at the same time, DVD offers new opportunities. What is your view of the future?

For our DVD music video activity, I see a positive future on offer. The first music DVD in Europe was released in 1998. Let’s have a look at what has happened since then. DVD player penetration in Europe is probably around 17% today. So, we are looking at some 26 million installed machines, a figure that could pass the 100-million mark by 2006. Add to that a further 50 million DVD-capable game consoles.

Today, some 45 million homes in the USA own a DVD player. The figure for Japan is nearly 7 million and is growing fast. When you look at DVD disc sales in Japan, DVD music video represents 30%. One disc out of three will be a DVD music video, which is significantly helped by the PS2 penetration. That’s why we distribute DVD music videos in game shops, for example.

Looking at the numbers there is only one thing to remember: they are going up.

As for title availability, the US had probably 1,400 at the end of last year, Europe, probably 800 titles. This year alone we will probably add 30% to these figures. The number of releases today is massive and by 2005-6 annual sales will have hit 74 million in the US, 33 million in Japan and 31 million in Europe.

Among the main European countries, France is the leading market for DVD music video just before UK. The countries to follow in Europe are probably Germany, Holland, Belgium and Spain. Looking at the global picture, Japan is simply massive and Brazil is growing rapidly.

What about VHS music video?

The VHS music video business was larger in 1992 than it is today – to give you an example – in UK 6 million units were sold in 1992, while just 3 million units sold in 2000. So the question is why would the consumer be interested in music video on DVD when it never worked on VHS?

So we asked consumers why they were buying DVD players and they said because of the additional content on discs, multiple languages, the quality and sound of the disc, the fact it is easier to store than VHS and widescreen. Three factors – quality, sound and improved picture quality – is what we offer in DVD music video.

Is the game over for VHS in this context?

The VHS activity is still important for some music video products. It depends on your target audience. On an S Club7 release, to give you an example, we had a ratio of 75% VHS to 25% DVD. On U2 it was the reverse.

We continue producing VHS. In some countries VHS recorder sales went up by 35%. OK, not much effect, but people are actually buying a lot of VHS recorders. So we continue releasing VHS and sometimes video CDs in some Asian countries. It’s part of the transition period.

No-one wants to rush the demise of the VHS. But we are all moving towards a disc-based future anyway.

How significant is the DVD music business?

To give you a rough idea, the European business is worth $270 million, and in the US it’s $600 million. Great figures I have to say, and when you realise that Japan was as big as all of Europe that gives you a rough idea of International business.

Across the world our U2 DVD achieved more than 800,000 units. Warner Vision also sold over 500,000 units for various titles.

A big seller in France or the UK probably reaches 50,000 units. But I would say an average figure for these countries is probably between 15,000 to 20,000 units. The all-time biggest seller (to date anyway) is “Hell Freezes Over” by the Eagles which has sold more than 1 million units worldwide.

What type of music DVDs are selling?

DVD music video comes in various formats but always requires one element – video content – but with better video and audio than VHS. You can understand how important that is for music.

In this context, singles are important for sales since they can also be used as a promotional marketing tool.
Then there’s live events, which offer a great opportunity to capture video material. You can have everything – the concert, the back stage interview, etc.

For compilation releases you have low production costs because the video clip already exists as distinct from a new album because most of the time you don’t have any video content so you need to produce it.
Finally, we have Special Editions – that is everything it could be, it’s unlimited content. This is more a production than a compilation.

How important are extras on a music DVD?

They are, in my opinion, essential – and already expected as standard. I hate vanilla DVD. They show a lack of imagination, especially for DVD music video. When you offer something to a consumer you should do it properly. It is not a CD, it’s a DVD, and they are not at the same price. I agree with Geoff Kempin from Eagle Rock Entertainment who says that DVD sales add to CD sales. It is true that we are creating, not replacing. This is CD+DVD and not CD-DVD.

Music fans love extras. All these bring you somewhere closer to the artist. But there’s another thing about DVD music video – something that is not applicable to film – it offers the consumer unique choices. You select the song you want to listen to. You watch it while you’re cooking for instance. You are not stuck for two hours watching a movie. And don’t forget we are dealing with artists. These people, by definition, are creative and the DVD format gives them the opportunity to be creative and to do whatever they want. And let’s not forget multiple angles!

For example in the DVD music video of a U2 concert we shot backstage a lot with various cameras. Viewers can choose a camera – we even put one in Bono’s glasses. With the S Club 7 DVD, you choose the camera you want and watch the concert featuring your favourite member of the band.

With the Texas DVD, you just press OK on your remote controle and it brings you from the concert to the videoclip of the song being performed At the end of the videoclip it brings you back to where you left the concert. Very easy to do.

Then is the marketing of DVD music video different from that of a CD?

Again I would say, yes. The first actual difference, and especially when you are dealing with artists, is the cost of production. A band asked us to add an extra video clip on a DVD at the end of the production process, when everything was done. Well, as you know, DVD production is like baking a cake: when it is cooked you do not put an egg on the top! What I am saying is that there is an educational process necessary for the people involved.

In terms of production costs and if you compare CD and DVD exploitation, the issue is probably not with replication costs, but more with compression and authoring. These costs do not occur in the case of CD production. For a DVD music video release they are somewhere between 10-35,000 Euro, These costs do not include obviously all the production costs such as shooting of the concert, editing, etc.

You also need a wider distribution for DVD than CD. We are not distributing our product in audio outlets only. We also distribute them in game shops, pure video outlets, dedicated retailers on internet, etc.

To answer your question, the key difference between CD and DVD exploitation is the marketing. The music marketing for CD is definitely more artist-based than content-based. For DVD we are more often releasing a product with historical significance, so the marketing needs to communicate more on the fact that the artist or the band has released a DVD.

Let me give you an example: Eminem. A recent CD album contains one DVD promo of 20 minutes. This DVD promo contains trailers of two DVDs which were released around the same time. It also includes a trailer of “8 Mile”, the theatrical movie featuring Eminem and for which he wrote the music.

We think that is real value added for the album and is a fantastic ad for the two DVD’s we’re releasing at the same time. But more than that it is a fantastic ad for the DVD business in general.

What is the importance of television for music video programmes?

TV is not just a promotional tool, nor is it a competitor. Television, most of the time, is a partner. More and more we can recoup some very high costs that are required for production of a live DVD by selling the rights to TV. One good example of TV coordination is probably the Robbie Williams DVD release, live at the Royal Albert Hall. The live show happened in London in October and before the end of the same year, they released the record, it was broadcasted on TV and then sold on DVD. With great results and great success on all formats. Another example is Cats. It went on TV and the morning after it was No. 1 in the DVD music video charts.

Do you have specific target audiences for DVD music video?

DVD music video appeals to all generation. You assume kids, because they are used to watching music videos. But today we are in the second phase where our target audience is defined by product and not DVD products in general. All our DVDs are niche market and fan based.

Let me briefly mention that creating music DVD titles allows the record label and producer extra opportunities. For example, the content of music DVD featuring a 5.1 audio can be re-used in various ways. 5.1 audio may be turned into stereo for CD release, the linear programme itself may be released on VHS, footage recorded with DVD in mind can also be used for a live television feed, and the 5.1 soundtrack can be used for a SACD or DVD audio release.

How important is a local focus versus a global approach?

International products are great, but they are not everything. And I give you two examples. In Japan, 90% of the DVD music video business is local, with sales of up to 300,000 units for an artist like Hikaru Utada. Another example is France where we have The Ten Commandments, a kind of Broadway show which has achieved a sales level of 250,000 units.

But because you have a local focus it does not mean that you do not need an International one. When, say, our department in Italy is releasing some product, they are pleased to have an International department. We can make this product available to everyone in the world at the same time. So that helped them to break even their development cost.

Will increased music DVD sales, CD burning and piracy have a negative effect on CD sales?

A touchy one. A recent survey in UK shows that nearly 19% of the 15-24 year olds thought that that they will never have to buy a pre-recorded CD because of music availability on the Internet. They will not say that about DVD if we react now.

I’ll give you three facts. First, DVD remains in its infancy, with relatively low penetration worldwide. Presently, DVD piracy is centred in Asia, particularly Hong Kong and China and most of the disc produced are for local markets. However, as we’ve seen for CD, audio pirate discs produced in one region are often exported to another one.

Second, DVD music is obviously not as great as an attraction as DVD cinema product. The volume expected on DVD music video is not yet high enough.

And Third, it is not only about physical application – it’s a lot about Internet Broadband and downloading. Downloading from the Internet is now presenting a greater threat to the home video market than pirate products – starting in South Korea, as consumers there are among the heaviest Internet users. We recommend that all our DVD music videos are encrypted with copyright protection, CSS and Macrovision....

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