EXECUTIVES, CONSUMERS LOSING FEAR OF FORMAT DIVERSITY.

Byline: GREG HERNANDEZ Staff Writer

CENTURY CITY -- There was a prolonged silence on the panel Thursday when top home-entertainment executives from the major movie studios were asked to predict where their industry would be in five years.

Who could blame them?

With new technologies such as digital downloading and high-definition television constantly emerging to give consumers new ways to watch movies and other entertainment, no one at the fifth annual Home Entertainment Summit was willing to take the bait.

``It just seems to change every Monday when you come in,'' Bob Chapek, president of Disney's Buena Vista Home Entertainment, later joked.

``I think you are going to see a lot of chaos in the next few years, and there isn't going to be a clear way through the woods,'' Chapek added. ``You need to put chips in a lot of different corners.''

During the second day of the two-day conference at the Hyatt Regency Century Plaza Hotel, industry movers and shakers from rival studios, who had faced off in previous years over two new DVD formats -- Blu-ray Disc and HD-DVD -- downplayed that long-brewing rivalry now that HD-DVD went to market in March and Blu-ray will debut later this month.

Although each side had previously warned that rival formats would confuse consumers and hurt the industry overall, many now insist that this was not going to be a repeat of the famous VHS vs. Betamax battle that took place in the 1980s.

Warner Home Video's Steve Nickerson remarked, during a separate panel session, that much has changed since the VHS-Betamax war, which pitted two incompatible videotape formats against each other with VHS prevailing.

``The world is a very different place than it was in 1988,'' said Nickerson, Warner's senior vice president of market management.

``Consumers are making choices every day in retail stores in many different product categories that are still successful, such as phones, portable audio and high-definition television. They are all thriving today despite there being multiple incompatible formats.''

According to statistics announced Thursday, approximately 25 million U.S. homes are expected to have high-definition televisions by the end of 2006. The studios believe they run the risk of losing ground in the DVD market if they don't start providing high-definition movies to consumers.

While the major studios were initially split into either Blu-ray or HD- DVD camps, most have since hedged their bets and are committed to releasing movie titles in both formats this year.

``The specific formats may fight it out like cats, but the concept doesn't go away,'' Robert E. Lambert, Disney's senior vice president of worldwide technology strategy, said during a lunchtime keynote address. ``In the end, consumers always end format wars - especially when we are not adriot enough as an industry to work it out in advance.''

With the DVD format now 9 years old, the home video industry saw only a 2 percent increase in revenue last year after many years of robust growth.

Revenue in 2005 amounted to $23.2 billion -- $15.4 billion of which was from DVD sales and $7.8 billion from the rental market.

``There is still growth out there, but you have to work a little bit harder for it,'' said Peter Staddon, executive vice president of marketing for 20th Century Fox Home Entertainment. ``The market still responds to product innovation and creativity.''

While overall growth is virtually flat, Staddon reported during a morning presentation on the overall U.S. market that sales of television shows on DVD continue to soar, with a 22 percent increase in 2005. New-release theatrical titles were up by 5.3 percent in sales and rentals, while older catalog titles were up by just under 2 percent.

Staddon said that, with all of the emphasis on the new high-definition formats, the industry would be wise to also continue to focus on standard DVD during what could be a long transition period.

``VHS and DVD existed together for eight years, and this gave DVD time to grow,'' he said. ``This is important for the next generation of DVD. For a number of years, DVD and HD will be existing side-by-side for consumers. They will fill different roles.''

Universal Studios Home Entertainment President Craig Kornblau, recipient of the conference's fourth annual DVD Visionary Award this week, said he believes all of the new technologies can co-exist without confusing or turning off consumers.

``It's not a revolution, not a replacement,'' Kornblau said. ``It's an evolution.''