But after years of heady growth, most U.S. majors' revenues from overseas homevideo dipped in 1998, sapped by factors including the recessions in Asia and parts of Latin America, and a paucity of blockbusters ("Titanic" notwithstanding).

The furrowed brows in Hollywood, however, are slowly giving way to tentative smiles as they look to DVD, revenue-sharing and other copy-depth schemes to usher in a revolution of vid biz.

Modeled on the arrangements between the majors and the big U.S. video chains, rev-sharing enables retailers to buy multiple copies of popular titles at reduced cost, and revenues are then split with the majors.

The DVD cause, championed most vigorously by Warner Home Video and Columbia TriStar HV, has suffered from the classic chicken-and-egg syndrome -- the reluctance of other studios to release product on the format while there are so few machines out there.

"As the hardware price points come down and software becomes more abundant, DVD will be very successful," Columbia TriStar Home Video president Ben Feingold asserts.

Disney is a late convert to the digital platform but, says Buena Vista Home Entertainment exec VP Greg Probert, DVD offers a "tremendous opportunity for us to heighten the at-home entertainment experience."

WHV struck a pioneering licensing deal in China in 1996, and now other studios are entering that vast market. Fox recently pacted with Chinese distrib CAV-Thakral and made its debut there Feb. 8 by releasing "Titanic" on video compact disc, the dominant format in many Asian markets.

The one major uncertainty will be the impact of Universal's decision to exit CIC Video, its co-venture with Paramount. U has elected to route its films via Polygram Video and has told Par it will quit CIC on Nov. 9 (when its pact expires) or earlier.

"I'm very up on international rental's prospects, boosted by revenue-sharing or copy-depth schemes that we've introduced in or are trailing in 20 territories," Probert says.

But Probert foresees a tougher time for the sell-through segment as recession or economic slowdown in many territories continues.

Domestic dominates

In 1997, the U.S. majors reaped revenues of $4.1 billion from the video business outside North America, with the rental segment generating $1.4 billion and sell-through ponying up $2.7 billion. By comparison, the domestic video business -- rental and sell-through combined -- garnered $5.8 billion, according to the Motion Picture Association figures, shared by one studio exec.

Figures for last year have not been tabulated yet, but Warner Home Video Intl. exec VP Edward Byrnes says he believes the majors' rental revs won't have moved up or down by more than 2% over 1997.

"It was a relatively stable year with no significant growth," says Feingold. "The industry did relatively well considering the financial uncertainty in some parts of the world."

'Titanic' year

The "Titanic" factor was considerable. James Cameron's blockbuster sold a record 32 million copies overseas, according to 20th Century Fox Home Entertainment Intl. president Stephen Moore.

At an average wholesale price of $15, that translates to a whopping $480 million. Although a few execs at other studios privately question the 32-million tally due to what they believe was a fairly high rate of unsold copies in some markets, Moore stands by the figures.

New alternatives

Opinions are divided about the effect new media such as video-on-demand, video games and the Internet have had on video rentals and purchases.

CIC Video president Paul Miller says his research indicates alternative media and leisure pursuits have had no impact on the volume of video transactions.

Conversely, Feingold contends the intro of digital TV platforms in markets such as Germany, France and Spain made video retailers nervous. But after the digital players launched, Feingold says, "those concerns have lessened."

Probert notes "we are seeing some impact on sell-through" from the Internet and the resurgence of the video game business."

Sell-through slump

Probert says his foreign division had an "outstanding" 1998 in rentals, driven by "Air Force One," "Face/Off" and "Starship Troopers," but sell-through was just "OK." Part of the problem, Probert opines, is that markets such as France have flattened after years of growth in retail video.

CIC Video suffered last year by being encumbered with a bunch of Universal and Paramount films that performed poorly at the B.O. in the last half of 1997 and the first half of '98.

"It wasn't a good year. We were behind our '97 year, which was just behind our '96 year, which was a phenomenal year," Miller said, speaking before the recent revelation that U was exiting the co-venture.

Col TriStar HV Intl.'s results were "slightly up" on the prior year, spurred by "Men in Black," "As Good as It Gets" and "My Best Friend's Wedding," Feingold says.

It's no surprise that Fox Home Entertainment Intl. -- driven by such hits as "The Full Monty," "Star Wars: The Special Edition" and "Romeo + Juliet" -- posted a company record in the fiscal year ending last June. And Moore, backed by "Titanic's" video rollout starting last September, predicts a 30% hike in the current fiscal year.

Of Warner's rental biz overseas, Byrnes says, "We managed to hold our own last year but our slate this year is considerably better with titles such as 'City of Angels,' 'You've Got Mail' and 'Payback.' "

"In sell-through," he adds, "we had been enjoying double-digit growth in most of the more advanced markets. Last year, that slowed to single-digit or fairly flat."

Rev-share potential

Initial results of revenue-sharing arrangements abroad have been encouraging.

But due to the differing retail infrastructures in many territories (especially those in which mom-and-pop operations predominate), Moore says it could take two or three years before copy-depth schemes cause a genuine shift in the foreign video business.

Some retailers are not embracing the concept. "There is always resistance to change and new ideas," Probert notes.

The jury is still out on DVD overseas. Japan was the first offshore market where the format was introduced, and results to date have been disappointing.

"We started releasing product on DVD in Japan 18 months ago and there is no growth," Miller says. "We ship 5,000-8,000 units (per film) and after that it stops dead." Moore blames the high cost of DVD hardware and software for inhibiting growth in Japan.