"The DVD successstory is really just beginning, but we are goingto have to be very intelligent about how we manage this story," said PeteSmith, president of Universal Pictures International, giving the keynoteaddress at Screen International's DVD: The Home Cinema Summit in Londonyesterday (July 8).

Smith's speech, TheFuture Of Digital Entertainment: Consumers, Content and Cash, touched uponvarious keys issues that would be discussed in more depth throughout the day.

Smith began bybriefly outlining the story so far, presenting statistics showing that homeentertainment revenues have doubled in the past five years, far outstrippingthe growth in cinema admissions.

"What I think isless well documented at the moment is that half of people buying a new releaseDVD have not seen it before," Smith suggested. "That is a fundamental shift inthe video business that sends a massive message to our organisation atUniversal. No longer can we say to people 'Here's the release date, this iswhen it's coming and this is the title.' Now we have to lure them in. We've gotto show them the content because this is the first time they are seeing theproduct."

He pointed outthat 50% of a title's business activities are in the first four weeks.

Smith then touchedupon threats and challenges. He noted that, in the UK in 2003, DVD pricingdropped 10% and is forecast to see a bigger drop this year.

In the US, recentresearch done by Universal showed 22% of people delayed buying new titles theywanted because they believed the DVDs would be discounted later. They are alsodeflected from buying new releases by bargain bins in shops.

"So on the onehand we're spending millions of dollars trying to get people in stores to buyour new releases, then on the other hand we're betraying ourselves with our ownbehavior of discounting shortly after the release date. So we're dissuadingcustomers from buying our new releases. This is lunacy," Smith pointed out. "Wehave to think about corridors or windows or some sort of discipline in ourindustry around this issue."

He also askedwhether an industry alliance was needed to tackle the problem of piracy afterpresenting figures on lost revenues.

Finally hecommented on future technologies such as internet delivery, portable technologyand high definition DVD and Blu-Ray technology. He said NBC/Universal wasclosely watching three key business issues on the subject: how high definitionDVD might impact piracy; the costs associated with manufacturing thetechnology; and functionality, what consumers reaction would be and how muchbetter it would serve the sector.