Videotapes plunging into obscurity

Soon, new movies will be on DVD only, meaning that VCRs have lost the 'format war.' But your DVD player may quickly fall victim next.

Polish up its plaque and get ready to mount it next to the Victrola, between the 8mm movie projector and that Brownie camera. The videocassette recorder (VCR), whose flashing "12:00" has glowed in living rooms for nearly three decades, is about ready to retire to the home entertainment hall of fame.

Replacing the analog tapes of the VCR are an array of digital options that offer vastly superior features and convenience. They begin with the now ubiquitous digital versatile disc (DVD) player, continue with next year's high-definition DVD players, and may end with no special player at all - your content will be stored digitally on a hard drive or online.

As recently as 2003, more VHS tapes were being rented than DVDs. Just two years later, DVDs dominate that market. In the first six months of 2005, DVDs accounted for more than 84 percent of the rental revenue for Blockbuster Inc., the video store chain. VHS tapes brought in only 5.6 percent. (The remainder came from video-game rentals.)

Sales statistics are even more dramatic: Last year DVDs rang up more than $15 billion in sales, while VHS tapes accounted for less than $1 billion, according to the Video Software Dealers Association (VSDA).

Even the VCR's workaday job recording favorite TV shows for later viewing has been usurped. The price of a digital video recorder (DVR), which does the job better, has shrunk to less than $100 for a basic unit. And cable TV companies have begun to experiment with video on demand, renting recent movies for viewing anytime night or day and offering some TV shows for viewing anytime once they have aired. The movies and shows can be stopped, reversed, forwarded, or paused, just as with a recorded program.

Last month TiVo, a popular DVR service, held a mock "funeral" for the VCR. "Today we're officially saying farewell to the VCR," a company spokeswoman said.

While others say that's a bit premature, the evidence keeps piling up. Last summer's megahit "Star Wars III: Revenge of the Sith" was just released for sale in DVD format only. No VHS version will be available. Other recent films that earned at least $25 million at the box office and are also being sold this fall only on DVD include "The Hitchhiker's Guide to the Galaxy," "Herbie Fully Loaded," "Sky High," "March of the Penguins," "The Brothers Grimm," and "Dark Waters."

"Within 12 months or so, or sooner than that, we must expect that new [movie] releases will be exclusively digital," predicted Crossan Andersen, president of the VSDA, in a state of the industry speech last July.

A spot-check of a few Boston-area video stores seemed to validate the point. Several had no VHS tapes for sale or rent. One Blockbuster outlet in Ashland, Mass., did offer a handful of VHS rentals, but only in the children's section.

Some Blockbuster stores will continue to rent VHS, but others will not, says Randy Hargrove, a spokesman at the company's headquarters in Dallas. Blockbuster has stopped selling new VHS tapes altogether, he says, and Blockbuster Online, which rents videos over the Internet, deals exclusively in DVDs.

Despite the lack of new content for VCRs, Americans haven't stopped buying them. The Consumer Electronics Association (CEA) estimates that more than a million will be sold this year, along with another 4.6 million combined in a single unit with a DVD player.

The VCRs are "a replacement device," says Sean Wargo, director of industry analysis for the CEA, the trade group for the home entertainment industry. Many people have substantial VHS libraries - movies, television shows, and family home videos that they want to keep and view. This content will keep the VCR market alive for several more years, he says.

DVD faces two tough challengers

Meanwhile, units that combine digital video recorders and VCRs are expected to be popular in coming years, allowing consumers to transfer their favorite videotapes onto DVDs. The CEA expects almost 3 million of these DVRs to sell in 2005.

Some people who've finally figured out how to use their VCRs and are happy with them will find little reason to change, says Sean Bersell, a spokesman for the VSDA. "I still can't get my parents to go over to DVD - and that's OK," he says with a chuckle. "We're not quite ready to hold the funeral [for VCRs]."

Now that DVDs have established themselves as the dominant home video format, they're about to be challenged themselves. Two new high-definition DVD formats - Blu-ray and HD-DVD - are expected to come onto the market early next year. They'll offer advantages such as even better picture quality (especially when paired with high-definition TVs) and more storage per disc.

Each of the high-definition technologies has backers among Hollywood studios and manufacturers such as Toshiba and Sony. Some observers foresee a messy format fight, akin to the 1970s battle between the Sony Betamax and VHS videotape formats. Such a battle might keep a lot of buyers on the sidelines until it's settled.

"No consumer wants to be on the losing side of a format war," Mr. Bersell says. (Some say the Blu-ray format has begun to pull ahead.)

After the 'format war,' it's all online

But that may be the end of the great video wars. "Understand that [high-definition DVD] is the last physical format there will ever be," Bill Gates told the Daily Princetonian newspaper last month. "Everything's going to be streamed directly or on a hard disk."

Eventually, DVDs will be abandoned in favor of downloading, agrees Wargo of CEA. "That has not yet fully emerged," he says, because of the need for sufficient Internet bandwidth and copyright protection. Movie studios are reluctant to stream their content online until they know that illegal copying can be controlled.

Still, Bersell wonders how a world without VHS tapes or DVDs is going to work. "I can't figure out how to wrap up a digital download and give it to someone as a Christmas present," he says.

A quick scan through home-video history

Fall 1975 The Sony Betamax videocassette recorder goes on sale in the United States. Cost (including a 19-inch Sony Trinitron TV): $2,495.

October 1977 RCA begins to sell VHS recorders for $1,000.

November The Video Club of America begins to provide theatrical motion pictures on home video. Betamax and VHS tapes of "Butch Cassidy and the Sundance Kid," "Hello, Dolly!" "M*A*S*H," "The Sound of Music," and others sell for $49.95 each.

December George Atkinson opens the first video rental store in Los Angeles. Mr. Atkinson charges $50 for an annual membership. Rentals are $10 a day. Less than 20 months later, he owns 42 stores and begins to sell franchises.

1980 Pioneer introduces the laserdisc for the home video market.

1983 VCRs are in less than 10 percent of TV households in the US.

January 1984 The US Supreme Court issues a groundbreaking decision in Sony Corp. v. Universal City Studios Inc. case, which affirms the right of consumers to videotape TV programs to watch later.

June 1985 "The Cotton Club" is the first video released with Macrovision anti-copying technology.

1986 The first Blockbuster Video store opens, in Dallas. VCRs are now in 30 percent of American TV households, and video-rental spending totals $2.55 billion. Average price per rental: $2.38.

1993 Sony releases the last Betamax VCR model to be offered in the US. The machines continue to be made and sold in Japan through 2002.

March 1997 DVD is introduced in the US, and DVD players soon become the most rapidly adopted consumer electronics product in history.

April 1998 Netflix launches the first online DVD rental service.

November 2002 MovieLink launches its Internet video-on-demand service.

March 16, 2003 DVD rentals generate more revenue than VHS rentals during the preceding week - a first for DVDs.

June 15 For the first time ever, more DVDs were rented during the week than VHS videocassettes (28.2 million DVDs vs. 27.3 million VHS cassettes). For the year, DVD rental revenue exceeds that of VHS rental revenue ($4.38 billion for DVDs, $3.82 billion for videocassettes).

2004 Annual DVD rentals exceed VHS rentals for the first time. DVD saw 1.75 billion rentals, while VHS rentals were 842 million.

Source: Video Software Dealers Association

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