DISNEY EYEING DOMINANT SPOT IN DVD MOVIES; MOUSE HOUSE AIMS TO REPEAT VHS SUCCESS.

Byline: Marla Matzer Staff Writer

Attention, parents who have been holding out on buying a digital video disc (DVD) player: ``The Little Mermaid,'' ``The Jungle Book'' and ``Mulan'' are coming to DVD. You will be powerless to resist.

At least, that's what the Walt Disney Co. hopes. It will begin releasing its classic animated titles on DVD beginning in late October. A total of nine titles will be released through December, then ``put on moratorium'' for up to a decade, in a marketing move Disney has made with its animated movies on VHS. No prices were announced; DVDs typically sell for about $20 to $25, though Disney may be able to get a premium for these titles.

The DVD format utilizes discs that look the same as audio compact discs and computer CD-ROMs. Unlike the VHS tape system, DVD utilizes digital technology that allows many more layers of information to be put onto a disc. DVDs often offer ``extras,'' such as running commentary by the director or actors, that make the format appealing to collectors and cineastes. DVD discs can also be played on computers with a DVD-ROM drive, though the resolution on most computer monitors is noticeably inferior to that of a TV screen.

Disney's DVD strategy is seen as a shift for the company, which had held back on releasing its ``crown jewel'' animated titles on DVD. Disney was apparently unsure of the format's potential and also had some concern over piracy issues.

Now, though, the company is seeking to kick-start its sagging video unit. Long the envy of other studios, Disney's home video division has been lagging of late.

The majority of DVD players and software sold since the format's introduction two years ago have been to ``early adopters'': typically young men with a high disposable income. In recent months, though, it has become apparent that there is a growing appetite among women and families for the format.

``The initial appeal was definitely to early adopters. Starting this year, we've seen a broadening of the market,'' said Tonya Bates, general manager of video sales tracking firm VideoScan in Los Angeles.

According to VideoScan, the top three titles in sales since the introduction of DVD have been ``Lethal Weapon 4,'' ``Blade'' and ``Armageddon,'' all films that have heavy young-male appeal. But Disney's computer-animated ``A Bug's Life'' is already at No. 13, showing the potential for animated family features on DVD.

Bates said Disney may have been ``testing the waters'' for the family-oriented DVD market with their releases of ``A Bug's Life'' and the live action/special effects-heavy ``Mighty Joe Young.'' Both those films have performed very well, demonstrating the potential of children's and family titles on DVD. Disney chairman Michael Eisner told the Wall Street Journal this week, ``we're a hair's breadth away from DVD exploding.''

Several factors are contributing in a rise in DVD sales. A rival format that may have been causing some confusion in the marketplace, Divx (Digital Video Express), recently announced that it was folding. Also, DVD is slowly making its way into rental stores, making it more attractive to people who want the option to rent rather than purchase titles. Finally, DVD players have continued to fall in price, from an original floor of about $400 to under $300 today for a low-end machine. Prices are expected to drop again this fall to as low as $200.

There are now an estimated 2.4 million DVD players in U.S. homes. Though that's a tiny fraction of the estimated 80 million VHS players owned by Americans, the number of DVD players is expected to jump to about 4 million just by the end of this year. There are expected to be at least twice that many DVD-ROM drives in use on computers by that time.

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Photo: (1--2) Disney hopes to get into DVDs in a big way with limited releases of such popular animated films as ``The Little Mermaid,'' left, and ``Mulan.''