When it comes to the success of DVD in Europe, sales andpenetration are being driven by the UK - but the continent's Easterncountries are still playing catch up.

Speaking at Screen International's LearningLessons: Europe And The US seminar, JeanPaul Commin, president of industry body the International Video Federation,said that in 2003, DVD player penetration was up 92.8% year-on-year: last year26.4% of European households had access to a machine of some sort.

But the statistics, compiled with Screen Digest, mask bigregional variations.

Five European territories - the UK, Germany, France, Italyand Spain - are predicted to have household penetration of 55% by the end of2004.

This quintet also account for 75%-plus of the 303m DVDs soldin Europe in 2003, up from 182.4m units sold in the continent in 2002.

Sales figures for the top five territories for the firstquarter of 2004 look similarly buoyant (58m units sold), up 69% year-on-year.

It is in contrast to Eastern Europe, where player penetrationis at less than 5% and video is still the main format. "Piracy is themain obstacle to the development of these [East European] markets," addedCommin.

Europe's DVD giant is the UK. It accounted for around48% of sales in the top five territories in 2003 ' and a third of Europeanunit sales as a whole, buying more discs (145m) than France and Germanycombined, despite having less players installed overall than Germany.

"The most interesting case in the UK. It has apopulation more or less the same as France but has a rapid take up and higherconsumer spend," said Commin.

Mike Brown, head of the DVD Entertainment Group UK, whichpromotes and monitors use of the format, highlighted several factors behind UKgrowth, despite initial media scepticism at its take-up in the mid to late1990s.

These included demonstrations of players, both in stores andat friends' homes, familiarity with the CD-like discs, its digital appealand value for money (£29 for an entry level player).

The result, Brown pointed out, is that that DVD players, intheir first eight years in the UK, achieved a household penetration of around50%; in the same timeframe CD players and VCRs each achieved penetrations ofaround 30%.

"Now we are seeing a widening of the [disc] genresbeing sold, especially as the audience for DVD becomes more middle-aged,"said Brown. "This will become more important."

While films make up the core for DVDs sales in the UK (Q12004, 73.4%), other formats and genres also had a toehold including TV (9.2%),children's (11%) and music (3%).

Brown predicted that one of the key issues in the next fewyears would be the move to high definition TV, especially as pay-per-viewbroadcasters, affected by the success of high quality DVD, hit back: Sky hasalready announced plans for a high definition movie channel in 2006.

At the same seminar, Richard Lorber, president of KorchLorber Films, a new DVD label dedicated to recent and classic niche, tolddelegates about the outlook for smaller DVD arthouse distributors in the US.

"VHS is history," he said. "We are overthe hump. In two or three months time we will not do it [VHS] at all. It is aninventory risk for our business customers and does not have consumerappeal."

But he cautioned that the cost of entry to the DVD marketcan be higher than for VHS thanks to, among others, reduced profit margins, theextra cost of bonus material and the speed of changes in a new market."You have to run fast to stay in the same place."

Yet while there had been a decline in art house cinemas inrecent years to less than 100, Lorber pointed to the United States 600-plusfilm festivals as evidence of appetite for niche arthouse product.

"We are finding retail channels expanding due tospecialised retailers, cinema clubs and the internet."

And while mainstream fare see 50 to 70% of their eventualsales in their initial shipment, for niche arthouse the pattern is moresustained.

"We usually do 30 to 40% of our sales in the firstyear to 18 months," Lorber explained. "Films that once might havebeen passed over on their initial street date now have a continuinglife."

Koch Lorber releases include Intimacy, God Is Great AndI'm Not - of which Blockbuster took10,000 units - and the first US DVD release of La Dolce Vita, the company's biggest rollout for the finalquarter of 2004.

Aside from developing ongoing relationships with partnerslike Empire Pictures, Arrow Films and 7th Arts Releasing, Koch Lorber is alsoin talks with two companies about the possibility of working together onHispanic films.

"Our plan over the next five years is to grow from$3-4m in revenues up to $50m."