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2001: The Breakout of DVD Warren Lieberfarb President, Warner Home Video DVD Entertainment Group Press Reception International Consumer Electronics Show January 8, 2002 Shipments of DVDs doubled in 2001. Industry DVD Unit Shipments (in millions) 364 182 98 1999 2000 2001

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slide1
2001: The Breakout of DVD

Warren Lieberfarb

President, Warner Home Video

DVD Entertainment Group Press Reception

International Consumer Electronics Show

January 8, 2002

slide2
Shipments of DVDs doubled in 2001.

Industry DVD Unit Shipments

(in millions)

364

182

98

1999

2000

2001

Source: DVD Entertainment Group

slide3
Consumer sales of DVDs more than doubled in 2001.

DVD Unit Sales to Consumers

(in millions)

249

Library Titles

117

New Releases

100

32

41

132

12

20

59

1999

2000

2001

Source: AC Nielsen/VideoScan/Retail Estimates

slide4
Consumer purchases of DVDs per household is increasing.

Average Number of DVDs Purchased per Household

14.9

13.4

12.4

1999

2000

2001

Source: AC Nielsen/VideoScan/Retail Estimates and DVD Entertainment Group

slide5
Consumers spent $4.6 billion on DVDs in 2001, 2.4 times more than in 2000.

DVD Retail Consumer Expenditures

(in billions)

$4.6

$1.8

156% CAGR

Library Titles

$1.9

New Releases

$0.7

$2.8

$0.7

.25

.45

$1.2

1999

2000

2001

Source: AC Nielsen/VideoScan/Retail Estimates

slide6
Consumers purchased $8.4 billion of DVD and VHS combined in 2001, 1.5 times more than in 2000.

Video Retail Consumer Expenditures

(in billions)

$1.9

$3.7

2000

$5.6

$4.6

$3.8

$8.4

2001

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

DVD Purchases

VHS Purchases

Source: AC Nielsen/VideoScan/Retail Estimates

slide7
Last year, consumers spent a record-breaking $16.8 billion buying and renting movies on video.

Video Retail and Rental Consumer Expenditures

(in billions)

$20.0

$16.8

$18.0

+21%

$16.0

$13.9

$14.0

$7.0

VHS

$10.8

$12.0

VHS Rentals

$10.0

VHS Purchases

$7.7

VHS

$11.4

$8.0

DVD Rentals

$3.8

$6.0

DVD Purchases

$1.4

$3.7

$4.0

DVD

$6.0

$2.0

DVD

$2.5

$0.6

$4.6

$1.9

$0.0

2000

2001

Source: AC Nielsen/VideoScan/Retail Estimates/VidTrac

slide8
Sell-through is driving total video growth.

Video Retail and Rental Consumer Expenditures

(in billions)

$20.0

$16.8

$18.0

+21%

$16.0

$13.9

$14.0

Rentals

$8.4

$7.0

$12.0

VHS Rentals

Rentals

$8.3

$10.0

DVD Rentals

$7.7

$1.4

$8.0

VHS Purchases

$6.0

$3.8

DVD Purchases

$0.6

Purchases

$8.4

$4.0

Purchases

$5.6

$3.7

$2.0

$4.6

$1.9

$0.0

2000

2001

Source: AC Nielsen/VideoScan/Retail Estimates/VidTrac

slide9
Consumers spent $10.9 billion to see new movies on video, $2.8 billion more than they did going to movie theaters.

2001 Consumer Expenditures

(in billions)

$20.0

$18.0

$16.0

$14.0

$10.9

$12.0

VHS Rental

$8.1

$10.0

VHS Purchases

$5.1

$8.0

DVD Rental

$6.0

DVD Purchases

$2.0

$4.0

$1.0

$2.0

$2.8

$0.0

Video

New Releases

Theatrical Box Office

Source: AC Nielsen/VideoScan/Retail Estimates/VidTrac, AC Nielsen EDI

slide10
Consumers spend more money on Video than other entertainment options.

2001 Consumer Expenditures

(in billions)

$20

$16.8

$16.5

$15

$11.2

$10

$8.1

$6.4

$5

$0

Trade

Books

Video

Theatrical

Films

Music

CDs

Video

Games

Source: Video: AC Nielsen/VideoScan/Retail Estimates/VidTrac. Trade Books: Kagan MediaCast. Music CDs: Soundscan. Theatrical Films: AC Nielsen EDI. Video Games: Veronis Suhler.

slide11
DVD growth hit warp speed in 1999 when all studios released new films on DVD simultaneous with VHS.

Percentage of 4th Qtr. DVD Titles Released Simultaneous with VHS

100%

80%

60%

Not Day

& Date

88%

100%

40%

86%

Day & Date

42%

20%

25%

1997

1998

1999

2000

2001

Annual DVD

Player Sales (Mil)

0.3

0.9

3.6

9.9

16.7

Source: DVD Release Report

slide12
Consumers bought 16.7 million DVD players in 2001.

U.S. DVD Player Sales to Consumers*

(in millions)

20

16.7

15

9.9

10

5

3.6

0.9

0

1998

1999

2000

2001

*Includes Home Theater in a Box systems, Combination systems and Portable DVD players

Excludes DVD-ROM and Game Consoles

Source: DVD Entertainment Group

slide13
1 in 4 homes now own a DVD player.

U.S. DVD Player Installed Base*

(in millions)

30

25.1

5.0

20

13.1

20.1

1.5

10

4.8

Multiple Player HHs

11.6

1.3

Single Player HHs

0

1998

1999

2000

2001

*Includes Home Theater in a Box systems, Combination systems and Portable DVD players

Excludes DVD-ROM and Game Consoles

Source: DVD Entertainment Group

slide14
Including game consoles and PCs, there are over 54 million machines capable of playing DVD movies at home.

DVD-Capable Machines

(in millions)

54.3

60.0

50.0

7.5

40.0

15.5

DVD Game Consoles

26.1

30.0

DVD-ROM PCs

1.0

20.0

10.8

10.4

DVD Set-top Players

31.3

10.0

6.0

14.7

0

4.8

1999

2000

2001

Source: DVD Entertainment Group, Adams Media Research, NPD Funworld

slide15
DVD is the fastest-selling consumer electronics product of all time.

Number of Years to Reach Cumulative Sales of 30 Million Units

5

DVD

8

CD Players

PCs

10

Cell Phones

12

13

VCRs

Color TVs

17

0

5

10

15

20

Years

Source: eBrain Market Intelligence

slide16
2001 DVD player shipments exceeded last year’s CES forecast by 28%.

2001 DVD Player Shipments* - Forecast vs. Actual

(in millions)

20

16.6

15

13.0

10

5

0

2001

CES FORECAST

2001

ACTUAL

*Includes Home Theater in a Box systems, Combination systems and Portable DVD players

Excludes DVD-ROM and Game Consoles

Source: DVD Entertainment Group

slide17
Awareness and purchase intent for DVD are strong and continue to improve.

Aided Awareness

100%

Unaided Awareness

76%

Definite Purchase Intent

23%

Total Positive Purchase Intent

44%

Consumer research supports purchases of over

20 million DVD players in 2002.

Source: National Research Group, 12/16/01

slide18
Over 20 million DVD players are expected to be shipped in 2002.

U.S. DVD Player Shipments* - 2002 Forecast

(in millions)

25

20.8

20

16.6

15

9.7

10

4.1

5

1.1

0

1998

1999

2000

2001

2002 Projection

*Includes Home Theater in a Box systems, Combination systems and Portable DVD players

Excludes DVD-ROM and Game Consoles

Source: DVD Entertainment Group

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