Audiences tune in to DVDs for laughs.

U.S. network television is getting worse at generating guffaws. The lack of sitcom hits in the past few years, along with recent advancements in DVD technology, are among the factors leading consumers to purchase DVD sets of their favorite series. And, so far, studios don't seem to mind at all, as the TV-on-DVD market provides an additional revenue stream for everyone involved.

"The U.K. has a long history of TV on VHS and, later on, DVD," said Helen Davis Jayalath, senior analyst, Video, at Screen Digest and co-author of report "The Outlook for TVDVD: A Strategic Analysis of the U.S. and European Markets." In 1993, in the U.K., TV series generated 13 percent of total VHS sales, while the idea simply hadn't caught on in the U.S. The reason: in the U.K., the involvement of the BBC helped. In the U.S., making TV rights into DVD rights is a more complex process. "A lot of European territories have broadcasters with strong video distribution arms (TF1 being one of them), so TV series translate easier to DVDs. If a broadcaster owns the video rights, the process is much more straightforward," said Jayalath.

In the U.S., in 2000, the TV-on-DVD market was practically non-existent (generating a mere $132 million a year). But today, the market brings in $2.8 billion in revenue per year, and the number of units and revenues has doubled since just 2003. Revenue has grown 26 percent from just last year alone. Today in the U.S., TV-on-DVD represents 15 percent of the total DVD market. In the U.K., TV series account for over a quarter of all DVD purchases. But, Peter Staddon, evp, Marketing at Fox Home Entertainment, pointed out that "there was a TV-on-VHS business in Europe [first] because [shows like] Friends [weren't] broadcast on terrestrial channels, so [VHS and DVD] were the only way for many people to watch [them]. But," he said; "now the U.S. domestic [DVD] market is way ahead of the international market. If you look at the sheer number of titles, as well as the sale of those titles, the U.S. market is in a very strong position compared to the rest of the world."

One trend that exists throughout most of the world is the popularity of TV-on-DVD comedies, which are much hotter than dramas. According to a study compiled by Screen Digest (U.K.)/Adams Media Research (U.S.)/Nielsen VideoScan (U.S), all 10 of the top-selling TV DVDs in the U.S. last year were comedies, while in the U.K., nine out of 10 were comedies. In France, five out of the top 10 were laffers. In Spain, it was nine out of 10 comedies. In Germany, there was one top ten comedy. In Italy, only two comedies out of 10, and both were Friends DVDs. Jayalath pointed out: "As markets mature and develop, we see a shift toward more comedies. If you look at the top 10 titles in the U.K. a few years back you'll see many similar to those in Germany and Italy now."

The popularity of comedy series in most of the world is not a surprise, as comedies have a repeatability not found in dramas. There's also a pass-along quality; since fans often want to share a funny sketch with their friends.

While theatrical DVD prices are consistently falling, audiences don't seem to mind coughing up more cash for TV DVDs. Rochelle Bradley, senior International Sales executive, DVD and Home Video, Granada International, said, "one of the luxuries of the TV-on-DVD market is that you can sustain prices a bit more," she said. "Because the series often come in boxed sets, there can be extras and those can constitute higher prices." FremantleMedia's svp of Home Entertainment and Archive Sales, Pete Kalhan, pointed out that in terms of classic TV programs: "We are able to sustain the high prices because of extras, and because of hours, especially as whole TV series DVDs become more popular."

Besides the higher sales prices, another advantage to the TV series DVD over the theatrical DVD is its sustainable revenue. Lion's Gate's Kajsa Vikman pointed out, "A lot of times when you have a hit theatrical movie coming out on DVD, you see a peak in sales during the first week, and then it's really downhill from there; whereas television product has the potential to sell more consistently over time."

But Fox's Peter Staddon explained that higher prices don't always translate into more profitability. "The cost for music clearance is often crazy on TV series," he said. It's one of the single biggest facts in preventing some shows from coming out on DVD," he said.

DVD launches could potentially be seen as a way to cannibalize the audience for television, but DVD distributors do everything in their power to make sure that the DVDs help exploit their programs rather than hurt them. "We try to do things with the DVD launch that help build the audience for the show rather than cannibalize it," Peter Staddon said. The idea is "to create as much awareness and buzz around the property as possible," he said. "The most important thing when it comes to a show that is still on the air, is increasing its ratings," and DVD can do that. He continued, "It's really important that the ratings on that show are as high as they can be, so if we can do something from the DVD point of view to try and direct people to tune in and watch the show, then that's going to help us in the long run."

DVDs also seem to help, rather than hurt, shows currently airing in syndication. Mitch Burg, president of Syndicated Network Television Association, said, "With syndication's viewership up five percent from last year, if anything, DVDs of off-network series have only helped raise awareness of the programs." He continued, "Many of our members' top-rated off-network shows such as Friends and Everybody Loves Raymond continue to have strong ratings performances [despite their highly popular DVDs]." Carsey-Werner's co-president and COO, Bob Dubelko, said that the proof is in the numbers: "On an average day, watching That 70"s Show in syndication, we probably get five million viewers. With a DVD, we are probably in the 300-350,000-unit range; they really don't affect us that much. Where we make our money is in syndication," he said. "Syndication is something we think about from the beginning of production. DVDs are primarily an additional revenue stream."

The main reason DVDs are not threatening ratings is because those who watch shows in syndication or as first-runs are completely different consumers than those who buy DVDs, who tend to be collectors. Season-by-season DVD launches have helped lead to more off-the-shelf buys. When consumers buy all of season one of Sex and the City, for example, they are more likely to buy seasons two, three and four. Carsey-Werner's Bob Dubelko said that years ago the company tried to market series on VHS, but the bulkiness didn't work. "The more convenient packaging of DVDs really helps." New technologies also make season by season sets and one-shot deals possible, as was the case for Fox's Over There, whose pilot episode was launched on DVD a week after its broadcast debut in order to serve as a "tune-in" message.

Another type of DVD that is gaining popularity is the covermount. The way it works: DVDs are attached to a newspaper, book or magazine cover (hence, the name "covermount"), which relates to the series on DVD. Consumers can go into a shop every week and buy a new DVD for a reduced price. "We just kicked off a covermount program about a year ago throughout Europe. It has allowed us to explore our back-catalog and has provided an extra revenue stream, especially in terms of older series," said Granada's Bradley.

But, with the benefits of TV-on-DVDs' popularity will come some disadvantages as well. Among them is the threat of piracy. While piracy has not hurt the TV industry as badly as the film industry just yet, it seems almost inevitable that the genre will come up against this challenge. Fremantle's Kalhan said he realizes the unavoidability of it all, saying "as long as there is demand out there, there are people who will sell them," he said, pointing out that his company had just gone head-to-head with someone trying to sell a series on Ebay before the DVD was released in the U.S. He provided two solutions to combat the problem: "First and foremost it has to be an industry-wide initiative for education," he said. "It's all about the education. Consumers need to realize that piracy funds other major illegal activities (like drug trafficking), and they need to realize what kind of effects they have [on the industry]." He also said the industry needs to "embrace new technologies like coding and encryptions, but the truth is it will just be a matter of time before someone gets around it." He added: "One of the differences between DVD, particularly television DVDs' piracy and music piracy [which has hurt that industry immensely], however, are the extras; they make the whole product very compelling. And bootleggers won't have them. That's a key point of difference there."

The threat of piracy hasn't stopped broadcasters and content providers from planning for the sitcom's DVD future and breaking into other genres, namely reality series on DVD. But Peter Staddon warned, "Reality shows are difficult, because once you know who won, there's not much suspense involved. But," he said, "Some reality TV we've released on DVD, like The Simple Life are like watching a train wreck [and that can work]." Another hurdle facing reality series on DVD is that "there is so much of it on TV that, [unlike good comedies], people don't need to turn to DVD to get a dose of it." While FremantleMedia is planning to release a "Best-of" and "Best of the Worst" DVD of American Idol, seasons 1-4, Pete Kalhan agreed with Staddon that a reality DVD has to be particularly compelling to get off the ground. "This is not something that will catch on too much," he said, "but Idolis a bit different: there's a comedy element to the tryouts and you also have the ability to do a 'life after the show' component that you can't do with other series."

In an industry where the question often boils down to whether potential for success can outweigh the risk, television series being released on DVDs seem to have relatively little risk. "When you are dealing with a show that is not so popular, then there's a risk involved in releasing it to DVD," said Lion's Gate's Vikman, "but when you have a successful show, you are pretty much guaranteed an audience." And that, of course, makes everyone happy.

U.K.: Best-selling TV DVD January-December 2004E

Rank & Title                             Genre        Distributor

1. Little Britain: First Season          Comedy       BBC
2. That Peter King Thing                 Comedy       VCI
3. Friends: Season 10                    Comedy       Warner
4. The Office: The Christmas Specials    Comedy       BBC
5. The Simpsons: Season 4                Comedy       Fox
6. The Simpsons: Christmas 2             Comedy       VCI
7. Peter Kay. Phoenix Nights: 1          Comedy       VCI
8. Bo Selecta                            Comedy       VCI
9. Band of Brothers                      Drama        Warner
10. Sex and the City: Season 6           Comedy       Paramount

Italy: Best-selling TV DVD January-December 20040

Rank & Title                             Genre        Distributor

1. Star Trek Classic: Season 1           Sci-Fi       Paramount
2. Star Trek Classic: Season 2           Sci-Fi       Paramount
3. Star Trek Voyager: Season 3           Sci-Fi       Paramount
4. Star Trek Classic: Season 3           Sci-Fi       Paramount
5. Star Trek Voyager: Season 4           Sci-Fi       Paramount
6. Friends: Season 1                     Comedy       Warner
7. Friends: Season 2                     Comedy       Warner
8. Starsky & Hutch: Season 1             Action       Sony
9. Alias: Season 2                       Action       Buena Vista
10. Buffy the Vampire Slayer: Season 7a  Horror       Fox

Germany: Best-selling TV DVD January-December 2004

Rank & Title                             Genre        Distributor

1. Spacecenter Babylon 5: Season 1       Sci-Fi       Warner
2. Buffy the Vampire Slayer: Season 7a   Horror       Fox
3. Buffy the Vampire Slayer: Season 7b   Horror       Fox
4. ER: Season 1                          Drama        Warner
5. Spacecenter Babylon 5: Season 4       Sci-Fi       Warner
6. Spacecenter Babylon 5: Season 2       Sci-Fi       Warner
7. Band of Brothers                      Drama        Warner
8. 24: Season 2                          Mystery      Fox
9. Sex and the City: Season 6            Comedy       Paramount
10. Star Trek Enterprise: Season 2       Sci-Fi       Paramount

U.S. TV DVD MARKET
PROJECTIONS

                              2001     2002     2003     2004

TV SHOWS

Units (Millions)              6.3      17.9     41.5     95.2
% of Total DVD Sell-Through   2.0%     3.3%     5.4%     9.0%
Revenue ($ Millions)          253      714      1,460    2,263
% of Total DVD Sell-Through   5.5%     9.6%     14.8%    17.9%

                              2005     2006     2007     2008

TV SHOWS

Units (Millions)              135.2    162.3    176.5    183.5
% of Total DVD Sell-Through   10.6%    11.5%    11.8%    11.8%
Revenue ($ Millions)          2,740    3,103    3,308    3,410
% of Total DVD Sell-Through   19.0%    19.8%    19.7%    19.3%

U.S. N DVD REVENUES: ALL SERIES AND COMEDY SERIES

TV DVD Season Sets: Cume Rev. through 12/04             51,550.09
TV DVD Season Sets: Comedy                              30811.1 (59.8%)
TV DVD Season Sets: Cume Units Shipped through 12/04    1,833.9
TV DVD Season Sets: Comedy                              881.2 (48.1%)

All charts are courtesy of Adams Media Research