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DVD NEWS
DISPOSABLE DVDS ARE ON THE DRAWING BOARD
Disney tries out EZ-D; with no returns or late fees, a bid to boost business.
By Paul Sweeting and Scott Hettrick 5/16/2003
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The EZ-D disc is red when first removed from its airtight package; when it turns black, it no longer plays.
MAY 16 | In an effort to bring lapsed renters back into the market while boosting overall DVD sales, Buena Vista Home Entertainment is teaming with DVD technology developer Flexplay Technologies to test disposable discs designed to sell in supermarkets, drugstores, convenience stores and other nontraditional retail outlets.
The self-destructing disc, dubbed EZ-D, is playable for 48 hours from the time it's removed from its vacuum-sealed packaging, after which the bright red coloring on the backside turns to black and the disc becomes little more than a reflective coffee table coaster.
The technology is the same used by MGM last year for its 20-minute promotional disc tied to the release of Die Another Day. It was developed by 4-year-old, privately held New York-based Flexplay in conjunction with GE Plastics, a 50-year-old, multibillion-dollar company that produces the plastic used in many standard DVDs.
The four-city test kicks off in August with eight titles from Buena Vista: Signs, The Recruit, The Hot Chick, 25th Hour, Frida, Equilibrium, Heaven and Rabbit-Proof Fence.
Initial plans call for the discs to wholesale for $5, minus trade discounts, with a targeted retail price of $6.99, according to retailers who have been briefed on the studio's plan.
According to Buena Vista president Robert Chapek, the goal of the test is to target consumers who have stopped going to video stores by getting the discs into places that generate high impulse purchases, such as grocery checkout aisles or end caps.
"The main reasons people stop renting is the perceived inconvenience of returning and late fees," Chapek said. "The most important finding in our research is that this product appeals to the lapsed renter. It addresses their issues."
New titles will be added every four weeks, according to Chapek. More cities will be added depending on how well the idea tests in the first four. "If it takes a year to reach national rollout, I'm perfectly happy with that," he said.
Price points and retail positioning could change as Disney adds more cities and the studio learns more about consumer response, studio officials said.
Disney's deal with Flexplay is not exclusive, and Flexplay CEO Alan Blaustein said his company is talking with other studios and suppliers who could initiate similar tests with the new discs. Blaustein is also in talks with videogame and computer companies about applications for the technology that he believes could be even bigger than DVD movies if used for limited-play promotional samples.
An MGM spokesman said the company had no further plans to use the technology.
One aspect of the test that will not change, however, is Disney's decision to delay release of the limited-play discs for several weeks after a title debuts on standard DVDs in order to protect the market for the full-priced discs.
"We'll test various scenarios, but there will definitely be a (full-priced) sell-through window before the limited-play window," Chapek said. "We can't have even a modest amount of sell-through cannibalization."
Disney's EZ-Ds will leave out the extra features and bonus material included on many full-priced DVDs, although the discs can technically accommodate anything on a standard DVD.
Some major theatrical hits--including the Disney animated classics--may never be offered in the format, Chapek added.
Although Flexplay's technology is new, efforts to market limited-play DVDs have been around almost since the format was introduced.
One high-ranking executive at another major studio dismissed Disney's plan as "Divx in a can," a reference to the short-lived limited-play system backed by Circuit City Stores that came and went in 1999 after attracting only limited studio support.
Chapek rejected the comparison, noting that Divx required a special player and a telephone hook-up to Divx headquarters, while Flexplay discs will play on any standard DVD player.
Initial retail reaction, however, echoed response to those earlier efforts. After being briefed on Disney's involvement in the test, Blockbuster Video chairman and CEO John Antioco called EZ-D "the dumbest idea since Divx."
Even with the delayed window, Antioco said, there is bound to be some erosion of the full-priced DVD market. "This is a bad idea for the film industry, bad for retailers, and maybe even bad for consumers," Antioco said.
He added that the Flexplay discs could be just as susceptible to below-cost discounting to drive traffic as full-priced DVDs are.
"What do you think would happen if someone starts selling these for $1.99? What would that do to the consumer's price/value perception of DVDs?" he asked.
Chapek is undeterred, however. Although the studio believes the discs could work in Wal-Mart, its ideal scenario, he said, is to penetrate nontraditional but high-traffic retailers like supermarkets and convenience stores.
Disney is targeting checkout aisles and other locations that draw a high percentage of impulse purchases. Impulse purchases represent about 40%-50% of all Disney movies bought on video, a figure Chapek believes could be much higher.
He also said he sees room for growth in the rental business and that EZ-D sales will only boost the overall pie.
Though overall DVD/VHS rentals are up 5% this year--thanks mostly to a 76% surge in DVD rentals--overall spending on rentals has been basically flat since the mid-1990s at about $8 billion, Chapek said.
Even if rental revenue stays on its growth pace, it's not enough when revenue from the sales side of the business was up 22% last year. "We shouldn't be satisfied with minor percentage growth (in rental)," he said.
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