Digital Media Large-Size-Pack Sales Booming

By Jeff Malester -- TWICE, 11/8/2004

Now that the blank media DVD format has been firmly established in the marketplace, consumers are looking to reap additional savings benefits of larger sized, more economical packages that substantially reduce per-disc cost.

Shoppers and retailers, alike, stand to gain from the growing multipack selection available from a variety of makers. While consumers enjoy the pass-along savings of lower per-pack pricing, retailers in turn are exposed to healthier dollar volume hits at point of sale.

“The DVD format has been unique among new technology introductions for how quickly it has been embraced by almost every distribution channel and how early in the product cycle consumers and end users have demanded larger pack sizes,” said Peter Brinkman, VP/marketing at Maxell.

Already, more than 40 percent of consumer purchases of DVD packages are in spindle configurations, noted Brinkman, who said, “Maxell's newest product introduction, 50-pack spindle packaging, meets widespread consumer and end-user demand that reflects higher usage levels.”

Fair Lawn, N.J.-based Maxell emphasized the larger sizes offer excellent consumer value, and provide retailers with a product that commands a larger cash register ring and greater on-shelf impact, said Brinkman.

In the DVD camcorder category, Maxell's introduction of larger pack sizes addresses the needs of various retail channels enthusiastically embracing the camcorder category. This indicates higher usage levels and also demonstrates the DVD camcorder format is at the cutting edge of the rapidly growing digital camcorder segment, said Brinkman. It “further emphasizes the trend in the market toward consumers demanding larger pack sizes,” he said.

In addition to the positive sizing changes, Brinkman underscores continuing advancement along the DVD technology roadmap, which he feels adds excitement and freshness to the category. In the immediate future, he expects 16x and double-layer DVD+R to have an extremely positive impact on fourth-quarter category sales.

Memorex continues to widen its assortment of DVD media products, including larger sizes, with the Cerritos, Calif.-headquartered maker now claiming 45 different package configurations overall, including 11 DVD-120 media packs for the set-top DVD recorder market.

“As we move forward into the upcoming holiday season and beyond, DVD blank-media promotions will focus on large, spindle-package configurations, such as 25-, 50- and 100-pack sizes,” said Brad Yeager, senior product marketing manager.

“Larger package sizes provide the retailer with high top-line revenue that small-package options do not offer. In the months ahead, overall top-line revenue will be seriously impacted by lower-per-stick DVD disc pricing. Due to increased competition and abundant supply, rapid retail price decreases will continue to drive retail pricing lower. The outcome of the lower pricing should motivate the consumer to purchase and consume additional DVD blank media,” said Yeager.

Just as a larger package brings a healthier economy of scale to the recording media category, larger-capacity discs are opening opportunities for additional storage options.

Higher capacity, higher quality recording media is perfect for storing digital files and, increasingly, images from digital cameras and archiving video. Consumers generally are using recordable DVD media much the same way they did CD-R, reported Fujifilm USA.

“This holiday season you will see consumers scooping up digital cameras and digital camcorders — DVD recording technology and software applications that make using these devices simple to create digitized photo albums, etc., that incorporate still and video images, as well as music,” said James Cito, product manager in Fujifilm's optical, recording media division.

“One trend pushing the consumer market into recordable DVD technology is the introduction of consumer entertainment decks incorporating both hard-disk drives and DVD recorders — essentially taking advantage of popularity of the DVR subscription-based recording concept,” said Cito.

“That is, you can store a week's worth of favorite shows from your digital cable or satellite on the internal hard disk to watch at your convenience. Now, you can sort and select from these shows and record them to a personal DVD collection.

“For example, a 120GB hard disk can hold roughly 51 half-hour shows. A standard DVD [4.7GB] can hold eight half-hour shows in DVD quality. So, a consumer can capture and record full seasons of their favorite episodic programming — on a single DVD.”

Looking ahead, Valhalla, N.Y.-based Fujifilm expects a broad range of adopters to move quickly into DVD. These include mom — the family historian — contributing to scrap-book expansion and family reunions; tech-savvy, early-adopter college kids who get digital camera or DVD technology as a graduation or back-to-school gift; amateur film makers and cinematography students who now have affordable, flexible digital tools at their disposal; and corporate marketing, sales and training executives who create and burn their own DVDs.

Imation, which has expanded its line of DVD media to include 16x DVD and double-layer DVD, is providing consumers with more high-capacity options to better manage and store their digital information.

The company's 16x DVD media cuts recording time of a 4.7GB disc to five minutes, saving consumers and businesses valuable time, said Oakdale, Minn.-based Imation. At the same time, double-layer DVDs hold 8.5GB of data, eliminating the need to turn over the disc and providing users with nearly twice the capacity on one disc. Imation's double-layer DVD 5-pack movie boxes, for example, boost the multipackage, high-storage concept, at a $59.99 suggested retail.

“With the continued growth in digital photography and digital video applications, consumers and businesses are demanding advanced data storage solutions and more options to customize and personalize their digital creations,” said David Ferraresi, VP/general manager of Imation's optical business. “That's why Imation is offering several new products this holiday season to help customers maximize their digital lifestyles.”

The recent trend to selling DVD media in multipacks is not a new phenomenon, said Chris Bailey, director of recording media at Garden City, N.Y.-based TDK Electronics, in acknowledging the product's already solid selling foundation.

“As with CD-R several years ago, price erosion of DVD hardware and media has made DVD a much more affordable option for consumers to record their favorite movies or TV programming on to digital content, rather than analog VHS tape,” he said.

“In fact,” continued Bailey, “up until recently, TDK would have characterized DVD hardware/media as a product for early technology adopters, based on the higher retail price points. However, with DVD PC writers and recorders reaching $99 to $149 by this holiday season, DVD will become a mainstream product for consumers.”

In its effort to support this growth trend, Bailey said TDK has met industry demands for larger pack sizes as prices have eroded. Additionally, the company plans to launch products that will provide more variation for users, rather than just “plain vanilla” products.

“The sales trend at retail for DVD recordable discs, both in the plus and the dash formats, is skewing more and more to larger pack sizes,” said Mike Alford, recordable media and peripherals marketing, at Atlanta-based Philips Consumer Electronics. “This has generally followed the trend of CD-R sales, but seems more pronounced in the DVD category.

“The fact that consumers typically receive a dramatically lower price per disc as they buy in more volume has made the larger spindle or cake box packs the most popular choice. This has been especially true since advertised sales prices have fallen below $1 per disc for discs sold on spindles.”

As of this July, DVD recordable discs sold in 50-pack spindles were selling better than any other pack size, continued Alford. He validates this with information provided by NPD Intelect, which tracks DVD media sales-out from America's largest retailers. NPD's top-selling SKU list has the 50-pack DVD cake box in both plus and minus varieties as the top two sellers, with 25-pack cake boxes only slightly behind, said Alford.

“This trend extends to manufacturers as well, emphasized Alford. “As market prices fall for DVD recordable media, the large brands have to dramatically increase volumes to keep sales revenues growing. This makes the 25- and 50-unit containers an ideal way to grow volumes more quickly.

“DVD makers also become more efficient when selling lots of discs in simple bulk-type packaging, such as spindles or cake boxes,” said Alford. “This is evident as today's best prices for DVD media are available in the 25- and 50-disc packages, much like CD-R.

“The overall market is growing quickly as consumers buy DVD recorders to replace their VCR machines and PC DVD recorders replace CD-RW drives in new PCs. Competition is heating up among the leading media makers.”

When you combine increased demand for recordable DVD media with the ever-increasing value of large quantity-pack sizes, the suggestion is you have a market that will grow significantly over the next few quarters, summed up Alford.

“While its is true that the industry is tending toward larger and larger multipacks, we still offer the casual user single or five-packs for DVD-RAM and DVD-R, while the volume user can choose from 50-spindles,” said Marko Wityk, national marketing manager for recording media and accessories at Panasonic Consumer Electronics.

Secaucus, N.J.-based Panasonic, which is working with its retailers to let consumers know not all discs are created equal, according to Wityk, is working hard this fall to increase sales up and down its media lineup.

“As the market for DVD recorders and camcorders continues to grow, we at Panasonic look to meet the varied needs of retailers and consumers this holiday season — both in terms of reduced costs and increased speed of media — with a wide variety of packaging configurations and media choices,” continued Wityk.

“This fall, we will introduce our new 5x DVD-RAM blank media — both single- and double-sided — in a variety of packages, giving retailers a broad selection to offer consumers, thus increasing their sales opportunities. We also offer similar choices to dealers and consumers in full-size DVD-R discs and 8cm-RAM and -R discs for camcorder users.”

In the increasingly more sophisticated North America retail market, especially the explosive-growth DVD media market, it is not possible to offer consumers a one-size-suits-all approach to marketing blank media, said Ronan Ryan, director of product marketing at Charlotte. N.C.-headquartered Verbatim.

“We cater to all consumers — from the technically advanced, early adopter who wants Verbatim's advantage of first-to-market products, to the experienced, large-volume user who shops for the lowest prices and larger pack sizes,” said Ryan.

Emphasizing that some users prefer to purchase in smaller pack sizes with standard or slim jewel cases, Ryan cites July data from NPD Intelect that shows the five-pack cased product is actually the most popular DVD pack size sold at retail in the United States.

Other users, he pointed out, prefer larger quantities in lower-cost packaging, namely spindles or cake boxes. In July, the 25-pack spindle was the next most popular pack, according to the NPD data.

“As unit prices decline, larger pack-size price points become more attractive, and mass market retailers like to maximize the cash register ring,” continued Ryan. “This is a natural progression. However, we should not forget the important new user who, at least initially, buys in smaller quantities at each store visit.

“When new technology advances are made, such as higher speeds and double-layer products, the unit costs are initially higher, so smaller pack sizes are more common. In time, these packs also migrate to larger sizes.

“There also seems to be a demand for combo packs — combinations of recordable and rewritable product in a single retail SKU. We have found a strong demand for a double-layer solution kit, where a consumer can purchase a combination pack of eight DVD+R, one DVD+RW and one DVD+R DL discs in a reasonable priced combo-pack, often purchased to complement a new DL-drive purchase,” said Ryan.

Verbatim even sees a different need in the consumer electronics space vs. the PC space, where set-top recorder users like their DVD-R and DVD-RW product packaged in video boxes similar to commercial DVD movies, so they can store and display video recordings in the same location as movie collections. Also, the company said rewritable products more often are purchased in individual cases because users want to store discs in protected cases between writing sessions.

The majority of blank Ridata-brand CD and DVD products, from Diamond Bar, Calif.-based Advanced Media, are packed in 50- or 100-disc quantity cake boxes that provide a convenient and cost-effective product solution for users, said Andy Huang, marketing manager. The company's 16x and dual-layer DVDs will continue to be packaged in smaller quantities until drives have a larger installed base, Huang noted.

“The price of DVD players and recorders has dramatically dropped during the past two years, [which has] created a larger installed user base that has greatly increased consumer demand for blank media usage,” said Huang. “Due to the popularity of digital photos and video cameras, more and more content is being created by the consumer, and need to store larger amounts of data is increasing. The price of DVD blank media has also dropped significantly around the world as well as in the United States, due to greater manufacturing capacity.”

At the same time, Ridata DVD+/-R discs have begun to be packaged in bulk, and retailers are being encouraged to place bulk packaging on-shelf in order to be able to offer consumers a better per-piece price. Advance Media pinpoints this as a growing trend for most optical disc manufacturers, said Huang.

“CD-R prices have also dropped down low enough to be almost equivalent to the price of a jewel case,” continued Huang. “It is a better solution for these products to be packaged in bulk, rather than adding the expense of jewel-case packaging, allowing the consumer to pick their own individual disc packaging,” he said.

Sony Electronics, which will be introducing an expanded lineup of DVD media later this year, also is planning new features for its disc selection.

“As DVD recording continues to take off behind the explosive growth of both computer drives and home recording decks, we are definitely seeing the demand for multipacks picking up,” said Michael Lucas, director of consumer and convergent media at the Sony Electronics media and applications solutions division, based in San Diego.

“We predict our most popular SKUs for this holiday season will be 25- and 50-packs. Then we'll start to see it increase to 50- and 100-packs. Additionally, not only will consumers expect more media, but they will also be expecting more from their media,” he said.