Video disc champion delivers success to hungry industry

There was no mistaking the tear in Warren Lieberfarb's eye in a Las Vegas ballroom last month. Strong men don't blub, but this was a poignant moment, the passing of a milestone for the president of Warner Home Video, the Time Warner subsidiary.

What moved Mr Lieberfarb was the coming of age of his foster-child: the digital video disc player. Over Christmas, the DVD had been the US family gift of choice.

It was the fastest-moving home electronics introduction on record, and the mass-market success the industry had been looking for since the compact disc player. Big box retailers, hardware makers and film executives poured praise on "their" achievement at the celebratory event in Las Vegas. Even Bill Gates sent a Microsoft evangelist to join the chorus.

Mr Lieberfarb was last to speak. His company's sales of films on disc had ballooned to $240 million (€213 million) at wholesale prices in 1998, he said. Eight million discs were stacked next to almost 1.4 million players in US homes.

His delivery and demeanour belied the role he had played as a bell-wether on the rocky path to convergence between the traditional world of entertainment and the digital era.

As the sales drive starts in Europe, Mr Lieberfarb took a pause in his office in Burbank, California, to review his role as the "champion" of DVD.

Without his commitment and sharp elbows, the market would probably still be waiting for the DVD explosion. At best, digitally recorded films would be available in a muddle of incompatible formats.

Mr Lieberfarb's "odyssey" started in 1968, when he first aired his thoughts on the film business in a paper to his boss, the president of Paramount Pictures.

The trouble with film lay not with the product, but the way it was distributed, he said. Although video technology was still in its infancy, he thought films should be collected like books.

The concept had to wait until the mid-1980s and the introduction of the video cassette recorder, which some thought answered the distribution question.

By then Mr Lieberfarb was running Warner Home Video, and while making the most of the cassette rental market, he was not convinced tape provided the answer he wanted. Many have since subscribed to his view. Mr Lieberfarb believes that the proliferation of TV channels which started with cable in the 1970s and has lately been expanded by satellites delivering 200-plus channels, digital cable and digital broadcasting services, bodes ill for the future of the video rental business.

While tending Warner's home video interests through the subsequent VHS boom, he dusted off and refined his original concept. Films should be collectable - like paperback books to be bought, kept, "read" at whim by anyone in the household, independent of programmers, without the inconvenience of going out to the store, and cheap enough to count as impulse purchases.

Video cassettes, though relatively complicated and time-consuming to reproduce and assemble, offered one possible way forward, and it was Warner, in company with Paramount, which pioneered home videos for sale in 1985, at $39.95 apiece.

But Mr Lieberfarb was already looking further ahead. "Price was central, and I discovered that in very high volumes the laser video disc could be a lot cheaper than VHS.

"I tried to convince the Japanese to make a combination laser video/CD audio player, but Pioneer was the only one interested," he says.

Sony and Matsushita balked at paying Philips and MCA (now Universal) the licence fees for their patented laser technology. In any case, Sony was focused on its 8mm video tapes, Matsushita was doing well with VHS, and there was little support at home. Most of Hollywood was "ambivalent at best" about the laser disc, Mr Lieberfarb says.

The tangle of conflicting interests among consumer electronics makers, the lack of interest in the film world, and sheer raw rivalry was to become familiar to Warner - and the rest of the world - as the troubled latter days of the evolution of DVD systems were played out in the business press.

Mr Lieberfarb says he never felt threatened by the setbacks, although this was unusual in Hollywood, "where how you perform every week is the determinant of your survival".

He believes he survived because he had supportive managers and a consistent track record of his own. "I don't think you can do it unless your CEO is a co-champion," he says. And since Warner Home Video consistently met or exceeded its targets on Mr Lieberfarb's watch, his credibility was intact.

The closing chapter of the DVD saga started quietly and depressingly when Warner Bros and Philips joined forces in 1990 to try to compress film and audio on to a CD-sized disc. A year later, he recalls, the picture quality was still inferior to conventional videotape.

Luck took a hand in early 1992 at a Time Warner meeting with Toshiba (one of the group's minority partners in its cable and entertainment arm), when he discovered the Japanese had made much better progress with digital compression.

With Toshiba on side, the process and the flow of troubles gained pace. Less than a year later, putative partner Philips changed sides and joined Sony. Then Matsushita tried to defect from the Warner camp in a crisis deflected only by harsh warnings from the highest level in Time Warner, the world's leading media and entertainment group.

The grateful champion cannot bring himself to repeat the gory details, but he enjoys remembering the moment when Matsushita rejoined his crusade with missionary zeal and set out to demonstrate the inferiority of the Sony/Philips system to the studios. Yet the troubles were still far from over. In the middle of the technical tussles, Mr Lieberfarb had assembled officials from the main Hollywood studios into a committee. It had agreed a wish-list of what they wanted from DVD: pin-sharp pictures, hi-fi sound, protection from piracy. It was commonly understood that Mr Lieberfarb's baby was the one they would adopt and that supplies of software for the prospective players were guaranteed.

But appearances deceived. "I am not sure this committee was visible to the highest management of its members' employers," he says, recalling the time in late 1995 when Walt Disney, 20th Century Fox and Paramount held back as the final threads were being drawn together.

By then, however, DVD was a full-blown corporate priority for Time Warner, and Mr Lieberfarb's supportive superiors sprang to his aid. The laggards were told they should review their position if they "wanted to effect certain transactions with Time Warner", and the deal was done at last: the world's leading electronics and entertainment companies had agreed against the odds on a single-format system for viewing films on television or the computer.

A "soft" launch in 1997 led to the hard sell in 1998. This year, player sales are predicted to rise by 60 per cent.

But Mr Lieberfarb has one more stage to go: to squeeze disc prices down to the "impulse buy" level. Now, as when he started, he does not know how he will achieve this, but he knows he will get what he wants in the end.