Europe's hardware sales drive software wave.

The DVD Entertainment Group Europe is a pan-industry body, which promotes the DVD format and its benefits to consumers across Europe. It also provides information to the consumers and retail industry. It commissions regular market reports from GfK, the oldest market research group in Germany, employing 5,200 people in 57 countries. Western European DVD sales continue to grow at a record pace, reports GfK. In 2003, the individual European DVD markets all experienced rapid growth, with sales doubling in three of the top five countries. There are approximately 20,000 DVD tides now available.

Specifically, during the course of 2003, GfK reported that total DVD penetration in Western Europe doubled from 19.7 percent in 2002 to 39.6 percent by year-end 2003--a year that saw total DVD player sales in Western Europe hit 25.3 million. This rate of growth continued in the first quarter of 2004, with the sale of 7.6 million more DVD players, taking penetration by March 2004 to 40.8 percent. One significant reason for these levels of hardware sales is the falling cost of players. In the U.K., for example, it is now possible to buy a DVD player for as little as 40 [pounds sterling] ($75) and in Italy and France, prices can run as low as 50 euro ($62).

GfK predicted that, during 2004, the top five European markets will see hardware sales total 29,234,000, making an installed base of 67,504,000 and representing an overall penetration of 55.1 percent. Within these figures, GfK predicted that France will see sales of 6,020,000 units, giving an installed base of 14,576,000 and representing penetration of 59.2 percent. Germany will record sales of 7,730,000, driving its installed base to 20,274,000 and throwing a penetration figure of 55.1 percent. Italy is predicted to have the lowest numbers of the five, with sales predicted to hit 3,960,000, more than doubling its installed base and taking it to 6,811,000 with a penetration of 31.5 percent. Spain will have sales of 4,645,000 driving the installed base to 9,034,000 and giving a 62.7 percent penetration, which is only just lower than the U.K.'s chart-topping penetration of 67.2 percent, drawn from an installed base of 16,809,000, reached after predicted sales of 6,879,000 during the 2004 calendar year.

Philippe Cardon, president of the DVD Entertainment group Europe, and svp and general manager of Warner Home Video Europe, said the party is far from over. "It is six years since the DVD format was launched in Europe, and sales are showing no signs of abating. We believe sales will continue to break records in 2004, with penetration in some Western European countries reaching almost 60 percent by the end of the year. He continued, "as in the U.S., more households are buying a second DVD player. In 2003 multi-player DVD households in Western Europe represented around 10 percent of the population, but we expect this figure to double by end of 2004 to around 20 percent." Cardon explained this trend, adding, "family households have different viewing needs and having more than one player means that family members have more choice in what to watch."

This increase in hardware sales is driving growth in software sales. In 2003, sales of DVD discs in Western Europe reached 300 million units, up 69 percent from 177 million in 2002. This growth was maintained in the 2004 first quarter report, said GfK, with sales in the top five European countries totaling 98.5 million units, up 69.5 percent from 58.1 million in the corresponding quarter in 2003.

The U.K. is by far the biggest DVD market in Western Europe, where reported sales for the first quarter of 2004 were 42,430,000, representing 43 percent of the total sales in all of the top five markets. The popularity of DVDs is due to the fact that the U.K., unlike any of the other markets, has developed a substantial DVD mail-order market. In second place, with first quarter sales of 23,559,000, was France, which only narrowly tipped Germany into third place with sales of 22,027,000. Both markets are well ahead of fourth place Spain that saw first quarter sales hitting 6,402,000, ahead of Italy with 4,077,000.

Movies dominated the best-seller lists in the first quarter of the year. The League of Extraordinary Gentlemen clocked in at number five in Spain and number four in both Germany and the U.K. Pirates of the Caribbean secured the number one spot in Spain, fourth place in France and sailed into the fifth spot in the U.K.; Ice Age cooled its heels in second place in Germany and seventh place in France.

Quarterly sales comparisons don't always paint a reliable picture as to which title was a hit and which took a hit, due to differing release patterns. A quick look at the full-year sales figures shows much greater consistency. In 2003, for example, The Lord of the Rings: The Two Towers showed truly regal form by ringing the number one spot in all five of Europe's main DVD markets. The little whiz Harry pottered into the number two spot in France and Spain and into third place in Italy, Germany and the U.K. James Bond must feel just a little shaken, if not stirred, to find himself dying another day in fifth spot in Germany, only seventh spot in his home market the U.K., and nowhere in the top 10 in either France or Spain or Italy.