Consumer Price Index

Developing an Hedonic Regression Model For DVD Players In the U.S. CPI

Paul R. Liegey1

Background

DVD (Digital Versatile Disk) players were introduced into the US market in the spring of 1997. Monthly sales of DVD players have been rapidly increasing, with calendar year 1999 sales nearly quadrupled from the 1.1 million players sold in 1998 (see attachments 1 and 2).

The CPI began reflecting price change for DVD players with the January 1998 revision. DVD players are priced in the Other Video Equipment item stratum (RA03) along with videocassette players/recorders (VCRs), video cameras/camcorders, satellite video products and other video products/accessories. As of December 1999, the CPI reflected a 26.5 percent decline for the Other Video Equipment item stratum since its inception in December 1997, with an average monthly decline of 1.1 percent (see attachment 3). Approximately 15 CPI quotes were being priced for DVD players by the end of 1999, representing about 7 percent of the average monthly sample (n ~ 227) for the item stratum.

DVD players represent a sort of evolved hybrid of VCRs and laser disc players. Since their introduction to the marketplace, consumers immediately noticed the sharper, clearer picture and excellent sound quality they provide. All DVD players provide enhanced features:

These enhanced benefits are realized on all DVD players as long as the DVD discs provide the information (that is, for example, not all DVD discs are coded to playback 8 different languages).

Retail prices for consumer-oriented DVD players currently range from $200 (on sale) to more than $1,200, depending on the quality of the player and market environment. InfoTech, Inc. reports that the average retail price for DVD video players has declined from $735 in the first half of 1997 to $470 in the second half of 1998 (see attachment 4). The mean price for all DVD players included in this study during the first half of 1999 was $443.39. The nearly 40 percent decline (from $735 to $443) in the average retail price for DVD players represents the dramatic reduction in price that is often associated with relatively new products.

The greatest drawback of the current generation of DVD players is that they do not record on a blank DVD disc either once (DVD-R) or multiple times (DVD-RW). Once the "R" and "RW" formats become mainstream for DVD players, they are likely to replace VCRs and laserdisc players as the video playback machine. DVD player prices are already competitive with some VCR and laserdisc player prices and offer a superior quality viewing experience.

Ideally, these three players should be modeled together so the CPI could be able to quality adjust item substitutes from VCRs and laserdisc players to DVD players as consumer purchases and preferences for video playback machines change through time. However, some of the characteristics for each of the players are unique to the individual player, making it difficult to include all three players in one model.

The 1999 hedonic model developed for DVD players is discussed below.

Data

Since the official CPI sample for DVD players was too small for regression estimation, an additional sample was selected for regression use only.2 A similar approach has been used to develop hedonic regression samples for CPI research on VCR’s, camcorders, and other products. This additional sample for DVD players was selected using a process that mimics the process used to select the official CPI samples. More than 500 DVD player price quotes were sent to the field in April and May 1999 for collection in existing CPI outlets. Unfortunately, many of the DVD player price quotes could not be collected because the outlets were not yet carrying the new product. The resulting sample of 282 DVD players was further pared down by another 23 quotes to exclude non-DVD player items that had been captured as part of the sample in error. Also included in the 23 quotes that were excluded from the sample were multiple unique item hits (that is, the same brand and model) for the same outlet. That is, if the same DVD player appeared more than once in the same outlet, it was excluded so that no outlet had two or more quotes with the same DVD player. The final sample size used for the DVD player model was 259 observations.

The bulk of the data preparation included review of the CPI checklist specifications (see last attachment) for consistency, completeness, and accuracy. The 259 observations in the sample represent 45 unique DVD players with a specific brand and model number (see attachment 5). Review of the April / May data collected for this product revealed some inconsistent, inaccurate, or incomplete specification descriptions.

To overcome these data deficiencies, the CPI specification elements (see last attachment) collected in the sample were overwritten using information primarily from manufacturers' websites for each of the 45 unique DVD players when such information was available. Other secondary source information was used to cross check or supplement the information on the manufacturers' websites. These other sources included Consumer Digests' 1999 Annual Buying Guide (December 1998) and Consumer Reviews' Video Buyers' Guide (Summer 1999). A summary of the collected sample and the overwritten DVD sample is presented in the appendix by specification category and element as they appear on the CPI checklist for DVD players (see attachment 6).

After the DVD player sample was edited for consistency, completeness, and accuracy, variables were created for each of the specification elements on the checklist (see last attachment). Unfortunately, some of the specification elements were useless because of lack of variation. For example, in the DISC FORMAT specification category only the A2 (DVD player) and A3 (combination LD and DVD player) specifications were eligible for variable creation. Since the A2 specification accounted for 100 percent of the sample, however, DISC FORMAT could not be used as a meaningful variable.

Similarly, in the TYPE OF PLAYER specification category (see last attachment), no variation occurred in the B specification after the data was overwritten. In other words, 100 percent of the DVD players in the sample were tabletop or shelf units and no meaningful variable could be created to include in the regression model. As portable units make their way into the market and our sample, this category will be more helpful.

In the COMPATIBLE FORMATS specification category (see last attachment), the C1 (plays compact discs-CD) and G1 (plays recordable digital versatile discs-DVD-R) specification elements reflected no variation. All DVD players play compact discs (C1), and none of the 45 unique DVD players in the sample were rated by secondary source information as being able to play the DVD-R (G1) format. Manufacturer and secondary source information about whether a DVD player could read the E1 (plays recordable compact discs CD-R) specification element was usually absent, and this specification element was also not used because of unreliable data. Only the D1 (plays video compact discs-CD-V) and F1 (digital video express compatible-DIVX) could be used as potential variables in the regression model. The DIVX format, a competing DVD format, is no longer being offered to consumers as of June 1999.

Other examples of specification elements (see last attachment) with little or no variation after overwriting the sample with secondary source information were the following:

More variation in characteristics data is better than less when developing a hedonic model. Systematically gathering information about technical DVD player specifications that were too difficult to collect on the CPI checklist also proved to be difficult with little result since not all manufacturers provide this information consistently.

Model

A hedonic model for DVD players estimating the average effect on price of characteristics has been specified as follows:

Here the bi’s represent the effect of the (observable) characteristics on the natural logarithm of price. The CPI prices that were collected in this sample represent "retail offer" prices, and approximately 20 percent of these prices were collected "on sale." The mean price for all DVD players in the sample was $443.39. The mean price for "regular" priced players in the sample is $467.21 with a standard deviation of $214.52, and the mean price for "sale" priced players is $343.86 with a standard deviation of $70.99. Since type of price (that is, regular or sale) is thought to have an impact on price, a dummy variable for sale price was included in the model to capture this effect, and its coefficient sign was negative.

A variety of information sources were used to formulate a priori expectations about what influences price for DVD players. Manufacturers, retailers, industry analysts, associations, and consumer/marketing organizations frequently focus on the superior audio and video performance of DVD players in terms of "total viewing experience" but usually this description is bench-marked or (implicitly) compared to the current standard for video play back machines. Also, contributing to the superiority of DVD players'; video playback capabilities are many of the enhanced features that were mentioned in the background section of this paper. While these features undoubtedly represent a greater array of consumer choice and presumably increase the viewing experience utility for the average consumer, they are common to all DVD players and thus exhibit no variation as potential variables.

The only (physical) characteristic that was available in the sample that is believed to distinguish video performance among DVD players is component video output (see definitions attachment 7). Industry and retail information indicates that this characteristic contributes to the overall capability of a DVD player when connected to a TV that possesses a component video input. While component video outputs are often touted as a distinguishing quality feature, they are more commonplace today than when DVD players were introduced to the market in early 1997. Indeed, this quality characteristic was relatively common in the sample, occurring in more than 70 percent of the observations. It was expected that component video output would influence price positively since it can provide enhanced clarity and color.

Similarly, the only (physical) characteristic that was available in the sample and that is believed to distinguish audio performance among DVD players is a built-in Dolby digital decoder (see definitions attachment 7). All DVD players output a digital audio stream that can produce surround sound like audio capabilities; however, a decoder (either external or built-in) is needed to process this digital audio stream. While this feature is expected to contribute to price positively, not all consumers might be interested in this feature if they have already purchased an external Dolby digital decoder. About 38 percent of the DVD players in the sample possess a built-in Dolby digital decoder.

Both group and individual dummy variables were created for each of the 14 DVD player brands represented in the sample. A priori expectations about how these brands should influence price were based on retail and industry information. While no explicit information was available about brand rankings and DVD player quality, some brands (and models) are targeted toward more sophisticated users of consumer electronics while most other brands (and models) are advertised simply by comparing the enhanced performance of DVD players to VCRs. Since DVD is currently perceived to be the video playback standard of the future, many manufacturers are racing to put their DVD player products on the market now to establish a reputation for future sales. DVD player manufacturers such as Marantz, Onkyo, Sony, Denon, Yamaha, and Mitsubishi were thought to cater to more sophisticated users while other brands such as RCA, Proscan, Samsung, Panasonic, and Toshiba seem to represent a more standard class of DVD players. Of course, individual or unique models of players within a brand, especially in successive generations, might vary in quality from the family of players offered by any given manufacturer. Brand effects were included in preliminary regressions, excluding one to serve as a base.

Other characteristics data that were collected on the DVD checklist and were thought to possibly influence price included: plays the compact video disc format, plays the DIVX format, compatible with Digital Theater Systems (DTS), remote control type—standard versus universal, and warranty coverage—1 year parts and labor warranty versus 1 year parts and 3 months labor.

In addition, control variables were created for city size, region, and type of business as collected by the CPI. The use of these control variables is to minimize any of the unexplained variation that might remain after the model has been fitted with price determining characteristics.

Iterative regressions were performed until the remaining parameter estimates in the model below exhibited relative robustness to the inclusion and deletion of other variables not included. The direction and magnitude of the parameter estimates seem reasonable, and the statistics pertaining to fit, significance, and collinearity are within generally accepted limits.

Variable Category

Variable Name

Parameter Estimate

T Statistic

Tolerance

Intercept

5.695137

282.426

Type of Price: Sale Price

-0.101076

-5.006

0.8538723

Brand: Onkyo

0.879601

10.035

0.9211067

Sony (high quality models)

0.699876

24.037

0.5472271

Denon

0.377169

5.235

0.9123200

Yamaha

0.364231

3.017

0.9670469

Mitsubishi

0.361707

5.083

0.9351258

Zenith

0.296203

2.464

0.9756267

JVC

0.269904

5.142

0.8696479

Proscan

0.134653

3.546

0.5277970

Panasonic

0.092632

3.407

0.7376674

Sony (standard models)

Base

Toshiba

-0.067112

-3.144

0.6396037

Samsung

-0.163521

-2.266

0.9093194

Audio Capability: Built-in Dolby

Digital Decoder

0.265096

12.995

0.5561771

Compatible with DTS

0.139823

6.935

0.6384225

Compatible with

Dolby Digital

Base

Warranty: One year parts and labor

0.123135

4.617

0.5048170

One year parts/three months labor

Base

Type of Outlet: Full price video/audio outlet

0.086722

4.408

0.7963235

Discount video/audio outlet

-0.074741

-2.831

0.8613919

Control Variables: B size city/Midwest region

-0.093542

-3.682

0.8994561

R2=0.9004 Adjusted R2=0.8930 F value=120.591 Number of observations=259

Liegey and Shepler (1999) as well as other researchers have acknowledged that in "the (consumer) electronics market, brand plays an important role as a price factor" when developing a hedonic model for a consumer electronic good. Given the data limitations in terms of variation of collected characteristics and the difficulty associated with collecting (technical) supplemental characteristics consistently across brands, the final model above represents a snapshot of how the average consumer values quality for DVD players in today's embryonic market.

Representing brand with individual dummy variables, an approach similar to Ioannidis and Silver (1997) provides a better fit with less multicollinearity than grouping brands by quality into low, medium, and high categories, an approach taken by Moulton, Moses, and LaFleur (1999).

Initial parameter values seemed to be a bit low for the Sony brand compared to other brand variables. Sony, an established leader in the consumer electronics market in terms of reputation and market share, seemed to span such a large portion of the quality spectrum, offering both standard and high end models. To compensate, variables for standard and high quality models were created for this brand (see attachment 5 for which model numbers were assigned to each group). Models included in Sony's high quality group are currently rated by many industry analysts as state-of-the-art DVD players. They include features such as dual-discrete optical pickups (one type of laser is used to read DVD software and another is used to read CD software), a built-in Dolby digital decoder, and a DVD "Navigator" remote control which provides the user with enhanced search and scan capabilities.

Inclusion of the Sony high quality variable provided a considerably better fit for the model, with the R2 statistic increasing from 80 percent to 89 percent. The Sony standard variable was used as a base variable for this category since it represents a fair percentage of the sample (14 percent) and embodies the usual features common to other players that consumers have come to expect from these video players compared to VCRs. Other brand parameter estimates in the model above appeared robust to the inclusion and deletion of other variables and were consistently (statistically) significant in preliminary regressions.

While the audio variable parameter estimates represented in the model, built-in Dolby digital decoder and DTS output, performed as expected in terms of magnitude and direction, the video variable, component video output, consistently reflected a (marginally) negative value that was sometimes statistically insignificant depending on the particular regression being estimated. It was decided that this video variable should be dropped from the model since it did not conform to a priori expectations. (That is, its parameter estimate was consistently negative, and contrary to market information this feature was not as rare—at least in this sample—as is sometimes advertised.) In particular, more than 70 percent of the DVD players in the sample possessed the component video output variable. Furthermore, many consumers in today's market may not value or realize the enhanced picture quality offered by component video output unless their monitor or TV possesses a component video input. Relatively few TVs in today's households have component video input.

Other variables that were tested for use in the model were the two (useable) format variables, plays video compact discs and plays DIVX, as well as variables for remote control type, standard versus universal, and manufacturer warranty. The plays video compact discs feature is generally advertised as an enhanced feature not available on all players and allows the user to watch recordings in the older format. A little more than half the sample possessed this feature but its sign consistently was negative when included in the model, and this variable was highly correlated with built-in Dolby digital decoder (see attachment 8). Since there was no practical or sensible way to create a new variable for built-in Dolby digital decoder so as to alleviate the correlation with the plays video compact discs variable, the plays video compact discs variable was excluded from the model. Similarly, the plays DIVX format variable was correlated with the few brands/models (RCA and Proscan) that offered this feature. In addition, since this format was discontinued in June 1999, it would not be a useful variable to leave in the final regression model.

While all DVD players come equipped with a remote control, some models try to distinguish themselves from others by advertising a universal remote control. Universal remotes give the user the enhanced benefit of being able to operate both the DVD player and the TV with one device instead of two. A priori expectations were that the presence of a universal remote control would add value to the overall price of a DVD player since this feature represents added convenience to the user. About 45 percent of the DVD players in the sample are sold with a standard remote control while the remaining 55 percent were offered with a universal remote control. When the universal remote control variable was included in the model, the parameter estimate was consistently negative and (statistically) insignificant. In addition, this variable is somewhat correlated with built-in Dolby digital decoder (see attachment 9). Removing the universal remote control variable and including a variable for standard remote contol produced a similar multicollinearity problem. The model would benefit more from the inclusion of a built-in Dolby digital decoder variable than one of the remote control variables. Therefore, the variable for remote control was not included in the model.

The last category of collected characteristics that seemed to have some potential in explaining DVD player prices was manufacturers' warranty. The standard manufacturer warranty offered with most DVD players today is one year parts and three months labor. This type of warranty was offered on approximately 80 percent of the DVD players in this sample. Most of the remaining players had warranties of one year parts and labor. A longer warranty for labor (one year versus the base of three months) might have a positive impact on price. When a variable for one year parts and labor was included in the model, it was positive and (statistically) significant. This variable remained relatively robust to the inclusion and deletion of other variables and was included in the final model.

Various control variables were tested representing region of the country, city size, and type of business as defined in the CPI. The most consistently performing and statistically significant control variables that were included in the final DVD model were full-priced video and audio equipment stores, discount video and audio electronics stores, and B size cities (populations 500,000-1,000,000) in the Midwest region. The purpose of control variables is to minimize the unexplained variation that might remain after the model has been fitted with price determining characteristics.

DVD Player Characteristics Excluded from the Model

Alexandre Balkanski (1998), president and CEO of C-Cube Microsystems, states that "(DVD) players will be among the most complicated consumer electronics products ever produced. Simply, the players consist of the following major components (see figure below):

DVD Player Architecture

When the average consumer is faced with limited information about what (varying) features are available on complicated electronic goods, like DVD players, they rely on brand reputation for an aggregate measure of product quality, reliability, and service. Our ability to collect specification data that may influence price is currently limited to how manufacturers and retailers advertise features for DVD players.

Information about the component pieces referenced in the "DVD Player Architecture" diagram above is central to how DVD players perform and could be used to develop a better hedonic model for this product. For example, laser (pickups) referred to in the "disc reader mechanism" above are used in optical storage systems (such as DVDs) and are classified by the color that corresponds to the laser’s particular wavelength, which in turn depends on the characteristics of the materials used to generate the laser light. Some DVD players employ only one laser to read DVDs and CDs while more sophisticated players, like the high quality Sony players, use two different lasers to read these formats more precisely. Industry reports also note that the use of lasers in the blue and violet, that has a shorter wavelength than a blue laser, end of the light spectrum will further enhance DVD’s performance.3 This kind of technical information related to DVD player performance is difficult for manufacturers and retailers to communicate to the average consumer but may be essential in determining what influences price.

Specification data that is less technical may serve as a proxy for quality if sufficient variation exists in the sample being collected. This year's review in the Consumer Digests' 2000 Annual Buying Guide (December 1999) notes that

"Now that the (DVD) format has proved itself, hardware manufacturers are readying a raft of new features to help distinguish the entry-level $200 models from the deluxe machines they're pitching to the videophile market. Deluxe DVD players come with jog/shuttle dials on the player and the remote, and some offer clearer picture search, variable speed picture search or a wider range of search speeds. A remote control is de rigeur, even on the budget-priced models, but step-up models offer programmable keys to allow adjustments of your system's volume, turning the video monitor on and off and many other functions.
Other deluxe features include video black level expansion, which provides another 7 percent of dynamic range; direct-digital outputs, allowing connection to sophisticated audio gear, digital recorders and high-end surround decoders; enhanced on-screen menus, making it easier to set up the player and navigate through a disc with special features; smooth motion scanning at high search speeds, usually bolstered by complex computer chips to store pieces of video in RAM; marker functions to return to specific scenes; picture zoom, which lets you blow up the image and reposition it, letting you closely examine details at the press of a button; and just as there are with CD players, there are multidisc changers, for stacking up to five movies at a time for all-day entertainment."

Also potentially important in distinguishing DVD player performance is whether or not a player is THX certified. Under this certification process, developed by George Lucas' THX Division, a DVD player submitted by the manufacturer first undergoes a comprehensive battery of tests using computer-controlled test equipment programmed with proprietary THX routines. After a player finishes this exhaustive ordeal on the test bench, it then "goes home" for extensive hands-on use in a variety of systems and listening/viewing environments. The first four THX certified players were announced at the 1998 Winter Consumer Electronics Show and ranged in price from $1500 to $15,000

Hedonic Quality Adjustments and Price Index Simulation

Of the three different approaches or methods that use the results of hedonic regression models to quality adjust price indexes, BLS employs the 'matched model' method in its official indexes.4 This method controls for quality changes based on the difference in product specifications between two items when a substitute observation, or quote, occurs in the price index sample. It is important to note that under the 'matched model' approach only substitution price changes, or quotes, are eligible for hedonic quality adjustments.

DVD players, as noted above, are priced in the Other Video Equipment item stratum (RA03) along with video cassette players/recorders (VCRs), video cameras/camcorders, satellite video products, and other video products/accessories. Review of attachment 10 reveals that in the second half of 1999 on average 11 price quotes represented DVD players each month in the CPI. In addition, of these 11 DVD player price quotes, only (less than) one price quote, on average, represented a substitution price change. Since the Other Video Equipment item stratum (RA03) averaged about 227 price quotes per month in the second half of 1999 (see attachment 9), little reason exists to believe that a quality adjusted index would differ from the published index for this item stratum index.

Of the 6 DVD player substitution price quotes included in the 9906 through 9912 CPI samples, 3 represented "model number only" specification changes which would yield no quality adjustments for these substitute price changes. Although the remaining 3 substitution price quotes reflected bona fide specification changes, one of these three price quotes reflected a "reinitiation" from a VCR player to a DVD player and could not be adjusted since the hedonic model for this item only includes DVD player prices and specifications. The remaining two substitution price quotes could have been adjusted with the DVD player hedonic model using the parameter estimates for brand and built-in Dolby digital decoder.

Quality adjusting substitution price changes for DVD players in the CPI will have only a small index impact at the US level until a greater number of these products are represented in the Other Video Equipment item stratum (RA03). The introduction of new products that undergo rapid price and quality change is widely recognized as a problem for price index estimation. BLS currently is testing a variety of ways to bring new goods into the CPI more quickly than would occur through the normal sample rotation process.

Conclusion

DVD players are an important product for the CPI to continue to represent in its sample since they are an example of a new product that has become very popular with consumers of electronic goods. It has taken "just two years from DVD's national launch in April 1997 for the format to ship 1 million units, compared with four years for compact discs and 11 years for VHS. Also, DVD players have outsold the VCR by 13 to one and the CD player by four to one" in terms of their first two years of unit sales.5 Almost five and a half million DVD players have been sold to consumers by U.S. retailers as of January 2000.

As noted earlier, once the recording capability for DVD players becomes mainstream, they should replace VCRs and laserdisc players as a dominant type of video playback machine. DVD player prices are already competitive with some VCR and laserdisc player prices and offer a superior quality viewing experience. Many of the enhanced features that are advertised and make possible this superior quality viewing experience are common to all DVD players.

The DVD hedonic model developed in this study represents a snapshot of how the average consumer values quality for DVD players in today’s embryonic market. Ideally, the final regression would have contained more variables representing objective product characteristics, and fewer brand variables that act as proxies for perceived product quality. The direction and magnitudes of the parameter estimates seem reasonable, however, and the statistics pertaining to fit, significance and collinearity are within expected limits. The parameter estimates in the model exhibit relative robustness to the inclusion and deletion of other variables not included in the final specification. The model should be used in conjunction with commodity analyst judgment to quality adjust CPI quote level substitution data when possible.

The CPI checklist for this product (see last attachment) is expected to be revised prior to the planned collection of the FY 2000 hedonic DVD sample as a means of capturing some of the deluxe non-technical specifications referenced above.

Notes

  1. The author wishes to thank Mary Kokoski, Lynn Reese, Nicole Shepler, Bill Thompson, Beverly Heneghan, and John Greenlees for helpful suggestions.
  2. For additional information about the hedonics project on quality change in the CPI see Charles Fortuna (1999), "Hedonics Project on Quality Change," Quality Quarterly; Internal BLS Newsletter, Winter 1998-99, pp. 1-3. http://www.dcppi.bls.gov/CPIProg/docs/qq/win98.doc (accessed November 1999).
  3. Murray Slovick, "Roses Are Red, Lasers Are Blue," E-Town, The home electronics guide @ http://community.etown.com/news/articles/bluelasermsa62899.html, (accessed November 1999). June 1999, pp. 1-5.
  4. For an informative description and evaluation of each of these hedonic approaches to quality adjust price indexes, see Silver (1998), "An evaluation of the use of hedonic regressions for basic components of consumer price indices."
  5. Yahoo! Business Wire, November 8, "DVD Player Pricing Is At All-Time Low For Holiday Selling Season," pp1.

References

Consumer Digest's 1999 Annual Buying Guide (December 1998), pp. 84-87.

Consumer Digest's 2000 Annual Buying Guide (December 1999), pp. 84-86.

Consumer Review's Video Buyer’s Guide (Summer 1999), pp. 50, 56-57, 70.

Ioannidis, C. and Silver, M.S. (1997), "Estimating the Worth of Product Characteristics," Journal of the Market Research Society, 3, 4, pp. 559-570.

Silver, M.S. (1998), "An evaluation of the use of hedonic regressions for basic components of consumer price indices," Third Meeting of the International Working Group on Price Indices, Statistics Netherlands, Voorburg: Netherlands (1998) 263-274. http://www.statcan.ca/secure/english/ottawagroup/pdf/23SIL3.pdf (accessed November 1999).

Paul R. Liegey and Nicole Shepler, "Adjusting VCR prices for quality change: A study using hedonic methods," Monthly Labor Review, September 1999, vol. 122, no.9, pp.38-45.http://www.bls.gov/opub/mlr/1999/09/art3full.pdf (accessed November 1999).

Brent R. Moulton, Timothy J. LaFleur, and Karin E. Moses, "Research on Improved Quality Adjustment in the CPI: The Case of Televisions," in Walter Lane, ed., Proceedings of the Fourth Meeting of the International Working Group on Price Indices, Bureau of Labor Statistics, Washington, DC, January 1999, pp. 77-99. http://www.statcan.ca/secure/english/ottawagroup/pdf/18moul98.pdf (accessed November 1999).

Alexandre Balkanski President and CEO of C-Cube Microsystems, "Digital Video Disc: The Coming Revolution in Consumer Electronics," @ http://www.c-cube.com/technology/dvd.html, (accessed November 1999). 1998, pp. 1-15.

Attachment 1

Unit Sales of DVD Players in the U.S

Attachment 2

DVD Player Sales

The following chart tracks monthly DVD player sales, back to the format's launch in March 1997. Note that sales data from the current month is not included in this chart. Please note that numbers indicate sales of players from manufacturers to U.S. retailers only (Canadian sales are estimated at end of graph). LD Combo players are included in these figures, but DVD-ROM drives are not. The numbers also include DIVX players — CEA does not break them out. This chart is updated monthly. All sales data is courtesy of the Consumer Electronics Association (formerly CEMA), and is used with permission.

DVD Player Sales History (since format introduction)

2000

1999

1998

1997

JAN

N/A

125,536

34,027

N/A

FEB

N/A

109,399

34,236

N/A

MAR

N/A

123,466

38,336

N/A (Format Launch)

APR

N/A

269,107

42,889

34,601

MAY

N/A

279,756

47,805

27,051

JUN

N/A

326,668

79,044

29,037

JUL

N/A

325,151

84,709

19,416

AUG

N/A

260,225

81,170

34,021

SEP

N/A

501,501

113,558

34,371

OCT

N/A

603,048

163,074

56,407

NOV

N/A

449,242

136,908

37,657

DEC

N/A

646,290

233,505

42,575

Yearly Total

N/A

4,019,389

(as of 12/31)

1,089,261

315,136

U.S. Grand Total

5,423,786

(3/97 to 12/31/99)

Source: http://www.thedigitalbits.com/articles/cemadvdsales.html (accessed January 2000).

All sales data is courtesy of the Consumer Electronics Association (formerly CEMA)

Attachment 3

Attachment 4

DVD Pricing Trends

Source: InfoTech, Incorporated http://www.infotechresearch.com/ (accessed November 1999)

Attachment 5

Brand / model number composition for DVD hedonic sample

Brand Name

Model #

N (Model #)

N (Brand)

Mean Price % of Sample
Denon DVD2500

1

DVD3000

2

3

682.98

1.2

RCA RC5200P

2

RC5210P

17

RC5220P

1

RC5231Z

18

RC5510P

1

39

310.81

15.1

Samsung DVD709

1

DVD907

2

3

336.31

1.2

Sony DVPS300

4

DVPS330

1

Standard DVPS500D

3

DVPS530D

21

DVPS550D

8

37

426.17

14.3

DVPC600D

21

High quality DVPS7000

5

DVPS7700

9

35

848.84

13.5

Toshiba SD2008

8

SD2107

1

SD2108

2

SD2109

39

SD3108

1

SD3109

13

64

325

24.7

Yamaha DVDS700

1

1

699.95

0.4

Zenith DVD2000

1

1

399.95

0.4

JVC XVD701BK

3

XV501BK

3

6

454.98

2.3

Mitsubishi DD2000

1

DD3000

2

3

526.31

1.2

Onkyo DVS717

2

2

899

0.8

Panasonic DVDA105

2

DVDA110

3

DVDA112

2

DVDA115

1

DVDA120

9

DVDA310

4

DVDA320

1

DVDX410

7

29

396.64

11.2

Phillips/Magnavox DVD420AT

3

DVD815AT

2

DVD825AT

2

DVD850AT

1

8

346.08

3.1

Pioneer DV414

7

DV606D

1

8

428.8

3.1

Proscan PS8680Z

20

20

423.69

7.7

All brands

259

259

443.39

100

Attachment 6

Hedonic Specification Data for DVD Players (RA031-02)

Specification Category C&S Collected Data(n=282) Overwritten Data (n=259)
Specification Element

frequency

/ % of Category

frequency

/ % of category

Disc Format

A1 Laser Disc (LD)

6

/ 2.2

0

/ 0

A2 Digital Versatile Disc (DVD)

254

/ 91.4

259

/ 100

A3 Combination LD and DVD

8

/ 2.9

0

/ 0

A99 Other

10

/ 3.6

Frequency missing = 4

Type of Player
B1 Portable

12

/ 4.3

0

/ 0

B2 Portable with monitor

1

/ 0.4

0

/ 0

B2 Tabletop or shelf unit

261

/ 94.2

259

/ 100

B99 Other

3

/ 1.1

Frequency missing = 5

Compatible Formats
C1 Plays compact discs (CD)

239

/ 84.8 (239/282)

259

/ 100

D1 Plays video CDs (CD-V)

184

/ 77.0 (184/282)

133

/ 51.4 (133/259)

E1 Plays recordable CDs (CD-R)

63

/ 22.3 ( 63/282)

No reliable data available

F1 Plays DIVX

47

/ 16.7 ( 47/282)

45

/ 17.4 ( 45/259)

G1 Plays Recordable DVDs (DVD-R)

72

/ 25.5 ( 72/282)

0

/ 0

H99 Other

18

/ 6.3 ( 18/282)

No reliable data available

Regional Encoding
I1 Plays Region 1 (US and Canada) only

236

/ 94.8

No reliable data available

I99 Other

13

/ 5.2

Frequency missing = 33

Disc Capacity
J1 Single Disc

239

/ 87.5

236

/ 91.1

J99 Other

34

/ 12.5

Frequency missing = 9

Audio Capability
K1 Built-in Dolby Digital decoder

161

/ 57.1 (161/282)

97

/ 37.5

L1 Compatible with DTS

184

/ 65.2 (184/282)

182

/ 70.2

M1 Karaoke Function

10

/ 3.5 ( 10/282)

0

/ 0

N99 Other
Video Output Capability
R1 Component video output

191

/ 67.7 (191/282)

185

/ 71.4

S1 S-video output

219

/ 77.7 (219/282)

259

/ 100

T99 Other

73

/ 25.9 ( 73/282)
U99 Lines of horizontal output

178

/ 63.1 (178/282)
Digital Audio Output Capability
V1 Coaxial digital output

170

/ 60.2 (170/282)

210

/ 81.1

W1 Optical digital output

168

/ 59.6 (168/282)

220

/ 84.9

X99 Other

51

/ 18.1 ( 51/282)
Remote Control
Y1 Standard remote

135

/ 47.9 (135/282)

116

/ 44.8

Y2 Universal remote

104

/ 36.9 (104/282)

143

/ 55.2

AA1 Illuminated remote

42

/ 14.9 ( 42/282)

90

/ 34.7

AB99
Warranty
AC1 One year parts and labor

109

/ 39.8

48

/ 18.5

AC2 Two years parts and labor

9

/ 3.3

3

/ 1.2

AC3 Three years parts and labor

0

/ 0.0
AC99 Other

156

/ 56.9

Frequency missing = 8

Country of Origin
AD1 Not Available

26

/ 9.6

35

/ 13.5

AD2 United States

18

/ 6.6

18

/ 6.9

AD3 Japan

197

/ 72.4

182

/ 70.3

AD99 Other

31

/ 11.4

Frequency missing = 10

Attachment 7

Definitions of Select DVD Characteristics

Component video output : A video signal in which the brightness (luminance) and color (chrominance) portions of the signal are processed separately. Where S-video separates the luminance and chrominance portions of the signal, a component video output goes a step further and splits the chrominance portion into two components. Benefits include improved color accuracy and less color bleeding.

Digital audio output : All DVD players include at least one digital audio output for sending the Dolby Digital bitstream to a Dolby Digital decoder (either a stand-alone decoder or one built into an A/V receiver). The two most common types of digital output are coaxial and optical. Both types require a special cable to connect to the digital input of a Dolby Digital receiver or decoder.

Dolby® Digital : A discrete multichannel digital audio standard offering enhanced sonic realism. DVD can contain 5.1 channels of Dolby Digital sound; six sound channels (left, center, right, left surround, right surround, plus a low-frequency subwoofer channel, hence "5.1" not "6.0"). The "default" sound format for DVD is Dolby Digital. Some DVD players come with a built-in Dolby Digital decoder which can take the Dolby digital bitstream from the disc and convert it into 6 channels of audio. DVD players without built-in decoders need to connect to a receiver or processor that can take the Dolby digital bitstream from the disc and convert it into 6 channels of audio to realize the enhanced audio effects.

DTS (acronym for Digital Theater Systems) : One of the rival sound formats to Dolby Digital is called DTS (Digital Theater Systems). DTS is another six channel (5.1)format. DTS uses much more storage space on a disc than Dolby Digital. Generally higher-priced decoders and DTS-enabled DVD players are needed to hear DTS sound. A DTS DVD MUST contain a Dolby Digital soundtrack in addition to the DTS soundtrack to maintain compatibility, in accordance with the DVD specification.

Regional codes : DVD players have a built-in regional code lockout feature, while the DVD discs may or may not contain a code (regional codes are optional on DVD software). A player will be unable to play a disc that has a different regional code. Discs may contain codes for more than one region or may not have any code, a feature which allows them to be played on any player in any country. The regional code for USA/Canada is "1."

Attachment 8

Select Pearson Correlation Coefficients for DVD Characteristics / N = 259

Play V-
CD
Dolby
decoder
DTS Comp-
onent
Coaxial Optical S-Remote U-Remote I-Remote
Play V-CD 1.00000
Dolby decoder 0.73720 1.00000
DTS -0.00777 -0.09010 1.00000
Component 0.37619 0.48939 0.31788 1.00000
Coaxial 0.49628 0.37378 -0.22792 0.26186 1.00000
Optical 0.32458 0.30349 0.52921 0.57013 -0.17582 1.00000
S-Remote -0.36611 -0.44026 0.04224 -0.18660 0.27647 -0.27209 1.00000
U-Remote 0.36611 0.44026 -0.04224 0.18660 -0.27647 0.27209 -1.00000 1.00000
I-Remote 0.33717 0.55776 -0.00432 0.46154 -0.12366 0.30725 -0.44529 0.44529 1.00000


Attachment 9

Number and Distribution of CPI Price Changes for Other Video Equipment (RA03) and DVD Players (RA031 - 02)

Other Video Equipment (RA03)

Month Total Prices
Collected
Substitutions
# / (% of Total Prices)
Comparable
# / (% of Subs)
Non-comparable
# / (% of Subs)
9906 233 53 / (23) 28 / (53) 25 / (47)
9907 191 38 / (20) 15 / (39) 23 / (61)
9908 233 34 / (15) 15 / (44) 19 / (56)
9909 201 32 / (16) 16 / (50) 16 / (50)
9910 247 26 / (11) 11 / (42) 15 / (58)
9911 220 27 / (12) 12 / (44) 15 / (56)
9912 264 14 / ( 5) 2 / (14) 12 / (86)
Average 227 32 / (14) 14 / (44) 18 / (56)


DVD Players (RA031 - 02)

Month Total
Prices
Collected
Substitutions
# / (% of Total Prices)
Comparable
# / (% of Subs)
Non-comparable
# / (% of Subs)
9906 9 1 / (11) 0 1 / (100)
9907 11 0 0 0
9908 8 0 0 0
9909 10 1 / (10) 1 / (100) 0
9910 9 0 0 0
9911 15 3 / (20) 3 / (100) 0
9912 16 1 / ( 6) 0 1 / (100)
Average 11 0.9 / ( 8) 0.6 / (67) 0.3 / (33)

BUREAU OF LABOR STATISTICS             U.S. DEPARTMENT OF LABOR
CONSUMER PRICE INDEX - ELI CHECKLIST______________________________________________________
 collection             outlet                       quote            arranging
 period: __ __ __ __    number: __ __ __ __ __ __ __ code: __ __ __     code:  __ __ __ __
 _________________________________________________________________________________________
 ELI No./                                                                     cluster
   title  RA031 OTHER VIDEO EQUIPMENT                                            code  02_
 item availability:    1-AVAILABLE    2-ELI NOT SOLD     3-INIT INCOMPLETE
 purpose of checklist: 1-INIT   2-INIT COMPL  3-SPEC CORR   4-SUB   5-REINIT   6-CHECK REV
 _________________________________________________________________________________________
           CURRENT PERIOD                    |      SALES TAX
                                             |
           price _ _ _ _ _ _ . _ _ _         |      included:        YES    NO
                                             |
           type of price:  REG   SALE        |
                                             |
                                             |____________________________________________
             |
 YEAR-ROUND  |  in-season:  JAN  FEB  MAR  APR  MAY  JUN  JUL  AUG  SEP  OCT  NOV  DEC
 ____________|____________________________________________________________________________
 respondent:                                   location:
 _________________________________________________________________________________________
 field message:
 _________________________________________________________________________________________
  CLUSTER 02 - VIDEO DISC PLAYERS
 
  DISC FORMAT                                 DISC CAPACITY
    A1  Laser Disc (LD)                         J1  Single disc
    A2  Digital Versatile Disc (DVD)           J99  Holds multiple discs (CD or DVD),
    A3  Combination LD and DVD
   A99  Other,                                      number, ________________________
 
        ______________________________        AUDIO CAPABILITY
                                                K1  Built-in Dolby Digital Decoder
 TYPE OF PLAYER                                       (DD or AC-3)
    B1  Portable                                L1  Compatible with Digital Theater
    B2  Portable with monitor                         Systems (DTS)
    B3  Tabletop or shelf unit                  M1  Karaoke Function
   B99  Other type,                            N99  Other audio capability,
 
        ______________________________              ______________________________
 
  COMPATIBLE FORMATS                          BRAND
    C1  Plays Compact Discs (CD)                P1  Denon
    D1  Plays Video Compact Discs (CD-V)        P2  JVC
    E1  Plays Recordable Compact                P3  Marantz
          Discs (CD-R)                          P4  Mitsubishi
    F1  Digital Video Express                   P5  Onkyo
          (DIVX) Compatible                     P6  Panasonic
    G1  Plays Recordable Digital                P7  Philips/Magnavox
          Versatile Discs (DVD-R)               P8  Pioneer
   H99  Other compatible format,                P9  Proscan
                                               P10  RCA
        ______________________________         P11  Samsung
                                               P12  Sony
 REGIONAL ENCODING                             P13  Toshiba
    I1  Plays region one (United States        P14  Yamaha
          and Canada) only                     P15  Zenith
   I99  Plays other regional encoding,         P99  Other,
 
        type, ________________________              ______________________________
 
                                             MANUFACTURER'S MODEL NUMBER
 
                                               Q99  ______________________________
 
 
                   SPECIFY ADDITIONAL INFORMATION ON RA031 PAGE 5 OF 16
 
 ZZ99
 _________________________________________________________________________________________
 BLS 3400B (Rev. February 1995)                                         RA031 page 4 of 16
                                                                        Revised April 1999
RA031-02 - VIDEO DISC PLAYERS - CONTINUED
 
  VIDEO OUTPUT CAPABILITY                     COUNTRY OF ORIGIN
    R1  Component Video Output                 AD1  Not Available
    S1  S-Video Output                         AD2  United States
   T99  Other video output capability,         AD3  Japan
                                              AD99  Other,
        ______________________________
   U99  Lines of Horizontal Output,                 ______________________________
 
        ______________________________        OTHER FEATURES
 
 DIGITAL AUDIO OUTPUT CAPABILITY              BA99  ______________________________
    V1  Coaxial Digital Output
    W1  Optical Digital Output                BB99  ______________________________
   X99  Other digital audio output, type
                                              BC99  ______________________________
        ______________________________
                                             OTHER PRICE FACTORS
  REMOTE CONTROL
    Y1  Standard Remote                       BD99  ______________________________
    Y2  Universal/Learning Remote
   AA1  Illuminated Remote                    BE99  ______________________________
  AB99  Other remote control feature,
                                              BF99  ______________________________
        ______________________________
                                             ** OTHER CLARIFYING INFORMATION
  WARRANTY
   AC1  One year parts and labor              BG99  ______________________________
   AC2  Two years parts and labor
   AC3  Three years parts and labor           BH99  ______________________________
  AC99  Warranty, other type,
                                              BI99  ______________________________
        ______________________________
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 _________________________________________________________________________________________
 BLS 3400B (Rev. February 1995)                                         RA031 page 5 of 16
                                                                        Revised April 1999

Last Modified Date: October 16, 2001

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