Specially Outfitted DVDs Replacing the CD

Music You Can See: Warner Plans to Sell Albums on DVDs

By ETHAN SMITH, The Wall Street Journal

The music industry has for years struggled to develop a new physical format that could spark increased sales by replacing the CD. Now Warner Music Group Corp. is planning an aggressive attempt to address the issue by pushing consumers to buy their music on specially outfitted DVDs.

Warner, the world's fourth-largest music company, is in the final stages of securing technical licenses that will enable it to sell a bundle of music and extra features on a single DVD, according to people familiar with the matter. The DVD would include a music album that plays in both stereo and surround-sound on a standard DVD player -- plus video footage that plays on a DVD player or a computer. There will also be song remixes, ring tones, photos and other digital extras that can be accessed on a computer.

The company plans to make the new format available to its subsidiary record labels for product-planning purposes as early as next week and to introduce the discs to consumers with a handful of titles in October. A full-blown launch is planned for early next year. The hope is to fuel increased sales of both new product and catalog titles, in the process lifting the industry just as the 1982 introduction of the CD boosted sales as consumers replaced cassettes and vinyl albums.

Retailers -- who have faced hard times as CD sales have declined in recent years -- have been enthusiastic about the new format. "The CD is getting old and tired," said Jim Litwak, president and chief operating officer of Trans World Entertainment Corp., which owns more than 800 music and media stores, including the Coconuts, Wherehouse and FYE chains. Indeed, MTS Inc.'s Tower Records was recently barred by at least two of the four major music companies from receiving new product, after a dispute over credit arrangements. Interim Tower chief executive Joseph D'Amico didn't respond to requests for comment.

	Warner Music Group Corp. plans to make the new format available to its subsidiary record labels for product-planning purposes as early as next week and to introduce the discs to consumers with a handful of titles in October.

"As a retailer I'm going to be holding on desperately for any compelling physical product," said Eric Levin, who owns two independent stores called Criminal Records in the Atlanta area. "So the introduction of a new format...is cause for excitement." Mr. Levin is also president of the Alliance of Independent Media Stores, a trade association with 30 members, who he said are also pleased by the prospect of the new format. A Warner spokesman declined to comment on specific plans but said the company, broadly speaking, plans to "offer content through a breadth of products to meet consumer needs. And we will remain nimble and innovative in every aspect of our business -- including our digital and physical offerings."

The DVD album is the latest in a parade of would-be successors to the CD, including the surround-sound products Super-Audio CD and DVD-Audio, and most recently DualDisc, which plays like a CD on one side and like a DVD on the other. Warner was one of two companies, along with Sony BMG, to embrace DualDisc last year. But the capacity of both the CD and DVD sides of DualDiscs is limited compared to normal CDs and DVDs. In contrast, the storage capacity of the planned Warner DVDs is up to four times what can be held on the DVD side of a DualDisc. Warner and Sony BMG have sharply scaled back their DualDisc output

Warner is not proposing any generic name for the new format, beyond simply "DVD album." The company plans to encourage retailers to stock them alongside normal CD albums on shelves, and they would likely carry a higher price tag, though just how much higher will probably be determined by the amount of extras included on any given disc. The company plans to continue releasing albums on CD, too, for the foreseeable future.

But there are some stumbling blocks that may discourage consumers from embracing DVD albums. The new discs would not play on normal CD players, meaning consumers could not simply pop their new discs into their car stereos or other players. And users would not be able to copy the main audio mix onto their computers. On the proposed DVD album, the main audio mix is to be protected by the same software that already protects the content on normal DVDs.

The DVD album would include "preripped" digital tracks of the entire album, ready to be copied onto a user's computer -- a totally separate set of data from the higher-quality, DVD-audio sound that users hear when they slip the DVD in a player. The lower-quality, "preripped" tracks could be copied to a CD.