Smith preaches patience at PEVE

NBC Uni Int'l boss encourages new strategies for DVD

DEAUVILLE, France -- Movie companies used to spectacular revenues from their home entertainment divisions will have to show some patience before the next phase of growth begins, according to Peter Smith, president of NBC Universal International.

"I think we have to recognize that we are going into a period of transition for about the next three years as hi-def DVD takes hold and downloading takes hold," he told delegates at the 15th annual Perspectives in European Video conference in the French seaside resort of Deauville. "It is going to take a little bit of time and our revenues are going to be a little flatter until we feel the full effect of this transition."

Smith, a veteran of the home entertainment business before his recent promotion (HR 10/19) to a wider remit that includes much of NBC Uni's international businesses, warned that the DVD industry has to find a way of combating the rampant price deflation currently being experienced in most international markets.

"The format has become commoditized and the price has come out of the business. We have seen something like a 50% decline in distributor pricing over the past four years. This has really taken a lot of the growth and the value out of the business," he said. "I would really encourage people to conscientiously manage the value in the business through this period and really invest in the future."

While the studios are relying in part on new formats to put some value back into the home entertainment sector, Smith conceded that they also need to re-examine their pricing strategy for new DVD releases.

"We are not preserving value and we are not developing strategies as an industry to combat it," he said in an interview. "I think we can maybe look at being more discerning with our distribution so we can preserve our value on new releases. We, as Universal, are saying no to some (price) campaigns now and, for example, have actually put our prices up in the Benelux. We will achieve lower revenues but we will grow our overall contribution from the territory."

He is, however, keen to dispel some of the gloom that has been afflicting the industry since revenues flattened last year. He forecast that the digital download business internationally will be worth about $1 billion over the next five years and that the hi-def DVD business will become a meaningful business in the same time period, accounting for about 10%-15% of the industry's revenues.

"I've been in the film business for more than 20 years and over that time I've heard people talk about the difficulties of the industry, but in all that time we've seen growth," he said. "I've heard people talk about the demise of cinema, free TV being threatened by pay TV and, most recently, the decline of the DVD business. But over the past 20 years, the business has grown and grown and grown. It has been a phenomenal success."

The two-day conference, which ends today, has attracted 280 delegates from across Europe from all sectors of the home entertainment industry, including retailers, distributors, technology suppliers and manufacturers.