Posted by Allan on 12/09/05 04:45

http://www.thestreet.com/_googlen/stocks/media/10256297.html?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA

DVDs Lose Their Shine

By Sandy Brown

TheStreet.com Staff Reporter

12/8/2005 7:04 AM EST

The home-movie business could face more pressure thanks to a host of
emerging technologies being rolled out by cable operators and an
onslaught of new video applications.

As cable companies like Time Warner's (TWX:NYSE - commentary -
research - Cramer's Take) Time Warner Cable explore enhanced services
like video on demand and mobile video partnerships, some industry hard
hitters believe the DVD could soon go the way of the VHS.

Time Warner Cable Chairman Glenn Britt, speaking at a UBS Warburg
media conference in New York this week, shrugged off worries about
threats to the cable business by saying new video platforms could end
up hurting the DVD market more.

Asked if he felt the video-capable Apple iPod was a threat to cable,
Britt responded that he sees it more as "a substitute for purchasing
DVDs than as a threat to the cable industry." He also touted the
various advantages of new DVR technologies that Time Warner and rivals
like Comcast are spending millions to roll out.

If a set of DVD sales misses at major animation studios Dreamworks and
Pixar earlier this year are any indication, the lucrative DVD market
could mature more quickly than the entertainment industry, which still
enjoys nice margins on DVDs, would like.

"All kinds of distribution platforms are cutting into a reasonably
finite media consumption pie," says one media strategist, who adds
that DVRs are one piece of it and the iPod is another.

Cable companies and large content companies are partnering and rolling
out more comprehensive video services. There is little question that
mobile video is taking flight on cell phones via Apple, Cingular,
Verizon Wireless and Sprint/Nextel .

GE's NBC Universal said this week it is partnering with Apple to
provide some of its hit shows like Law & Order available for download.
Meanwhile CBS said it is partnering with Verizon to provide some of
its popular series, like CSI and Survivor, on Verizon's wireless v
chip phone this month.

Warner Music Group's Edgar Bronfman Jr., whose industry has arguably
borne most of the brunt of technological change in recent years, said
at the UBS conference this week that he sees the media business
falling into three buckets as things sort themselves out: content
providers, aggregators and distributors.

Bronfman says that content producers, like Warner music, will get
proprietary margins, while aggregators (he cited NBC as an example)
act as a service and will get service margins. But he warned that
distributors like phone companies and cable operators will be stuck
with commodity margins.

For the consumer, the choice of paying $4 to watch a movie through a
cable system vs. $19.99 to own it on DVD might increasingly compromise
the historically high margins enjoyed by the DVD producers,
aggregators and distributors looking forward.






"Arguing with anonymous strangers on the Internet is a sucker's game
because they almost always turn out to be -- or to be indistinguishable from
-- self-righteous sixteen-year-olds possessing infinite amounts of free time."
- Neil Stephenson, _Cryptonomicon_

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