Music DVDs' position in the wider DVD market

New music formats - notably SACD, DVD-A and DualDisc - could help reshape the music retail market for physical formats. In the light of IFPI figures published last month, we look at the growing importance of the DVD market and how music DVDs fit in here.

In 2003, a total of 1.4B music DVDs were sold, showing considerable growth from 2001 when 0.5B were sold. This translates as having a global value of �25.8B (E38.3B). Of this, $1.8B (E2.7B) was made up of music DVDs and $0.2B (E0.3B) was music VHS cassettes, giving music DVDs roughly an 8% global share of all DVDs. Indeed, DVD was taken as being key to the growth in the Australian music market last year - the only market in the top 10 to record significant unit and value growth.

While sales of music DVDs are growing, their growth needs to be understood within a wider context. DVDs make up 5.7% of global music soundcarrier sales, growing 67% in value from 2002. In February, SoundScan reported that Usher's Confessions album sold 1.1M copies, making it the biggest first-week seller ever in the US. Tarantino's Kill Bill Vol. 1, however, last month sold over 2M copies in its first day. This is the level of competition for share of wallet that both music DVDs and CDs now face in the US. While music DVD sales are growing, so are DVDs in other entertainment sectors. The challenge going forward for music DVDs is how they can stand out in this marketplace and offer consumers attractive content/extras.

Piracy, DRM, censorship and increased disc capacity: barriers to the nascent market?

Immense faith has been placed in new formats - particularly SACD - because of their tight anti-piracy solutions. DVD, however, may be facing the same piracy challenges that CDs have been facing since the late-1990s. DVDs are reported to have the tightest copy-protection systems of any disc format in history; data is divided into blocks, with keys to decrypt each scrambled block hidden elsewhere on the disc. These keys were previously not transferred if a disc is copied, but the leaps in computer technology - and increases in the number of DRM hacking software packages available online - means they can be copied in seconds.

In-Stat/MDR estimates that 50M DVD recorders will be shipped globally in 2007 as sales of DVD recorders eclipse sales of DVD players, opening up further piracy concerns for content owners. Beyond mere piracy fears, the music, film and TV industries face a new issue - that of automated censorship of their content. Wal-Mart and Kmart plan to sell a new DVD player - developed by RCA and ClearPlay Inc. - that edits out sexual content, violence and offensive language from films. That's the Britney Onyx Hotel tour DVD facing a whole new set of challenges, then.

There are additional content concerns arising out of the format war that is taking place between HD-DVD (High-Definition DVD) and Blu-Ray for the next-generation DVD standard. These next generation discs can hold five times the data that today's DVDs hold - as much as 50GB. While the CD meant that acts had to increase their output to fill the format, will these new discs put pressure on content owners to load next generation discs with even more content and extra features to exploit the disc capacity to its fullest? More importantly, will consumers feel short-changed if these discs are not loaded to capacity?

Conclusion - exploiting the demand for live music DVDs

Live recordings currently dominate the music DVD market. Of the 6.4M music DVDs sold in the UK last year, 60% were concert-based (source: IFPI). In 2003, 18.7M music DVDs were sold in the US, up from 9.1M in 2002 (source: Video Store Magazine market research). In the US, however, music DVDs only made up 2% of the $11.6B (�4.5B/E9.6B) DVD retail market last year. This is despite the fact that they make up 11% of all DVD releases.

There are opportunities here to open up this market further. As covered last month, many acts are moving to net the impulse buyer by offering CD-R and USB keychain recordings of the gigs as soon as they end. Other acts are offering pre-orders (Pixies) or downloads (Metallica) of concerts that take a few days to reach consumers. There is clearly a market for limited edition DVDs of gigs too and this is potentially where the DualDisc format could come into its own, offering audio-only on one side and audio-visual on the other. Doing those all-important overdubs after the gig, however, might cause a few problems for the DVD footage editors.