- The Washington Times - Friday, December 19, 2008

What happens to all the old stuff?

Discarded computers, cell phones and televisions are often stripped for parts, reconditioned and resold or melted down in some end-of-life electronics processing plant.

Other artifacts of the ceaseless churning of media do not enjoy such adaptability.

They are, in fact, piteously irreducible.

We speak of unloved media formats such as VHS and cassette tapes; video games for discontinued consoles; and, increasingly these days, CDs.

Just this year, another format went the way of the eight-track: the HD DVD.

Mercifully, there is an afterlife for these electronic critters.

In the early 1990s, Ryan Kugler, president of a Burbank, Calif.-based company called Digital Video & Audio (DVA), jumped on a market opportunity to wring the last vestiges of profitability out of dead or dying formats.

Mr. Kugler’s home-entertainment closeout company buys surplus inventory from Hollywood studios and other media sources and sells them to all manner of interested parties across the country: dollar-discount retailers, flea markets, truck stops, zoos, museums, gift shops.

If you happen by the discount bin at Wal-Mart or a gas-station market, there’s a better-than-average chance it originated from one of DVA’s two giant warehouses outside Tampa, Fla. (The company temporarily rents storage space in other regions, as needed.)

Staggeringly, the company moves up to 22 million units a year, including movies, CDs, cassettes, books and toys.

Mr. Kugler says DVA already has sold a few million HD DVDs, the Toshiba-backed high-definition DVD format that was vanquished once and for all by Sony’s rival Blu-ray.

“It’s a fun business,” he says.

DVA, a family-run operation that generates about $25 million in annual revenue, began in 1989 as a used-video distributor. “Back then,” Mr. Kugler says, “video stores were opening up left and right.”

In 1994, he says the company received “an interesting call about a very large amount of new VHS Hanna-Barbera videos.” He bought the whole batch and resold it to Target.

From then on, Mr. Kugler began trolling the studio circuit in search of excess inventory. Studios are loath to talk about DVA’s liquidation business; to do so would be an admission that they overshot the market for a given title.

No matter Hollywood’s prideful reticence, DVA’s business model is a successful one that thrives on perpetual technological obsolescence. “As the format goes away, we find the last few retailers,” he says.

According to the Los Angeles Business Journal, the company found a cozy niche between Hollywood giants and mom-and-pop retailers.

With bricks-and-mortar establishments such as Tower Records disappearing, DVA has begun cultivating the burgeoning number of online guerrilla retailers, too. “We deal with a lot of larger Internet-based companies,” Mr. Kugler explains. “People work from home and sell items on the Internet.”

A veritable historian of video and audio media, Mr. Kugler recalls the sloughed-off formats from the faraway galaxy of the ‘80s and ‘90s, from the laserdisc to the digital audio cassette.

The shortest-lived format of them all, he says, was an early competitor of the DVD - Circuit City’s Divx videodisc, which could be thrown away after viewing, thus avoiding a return trip to the video store. However, the format required a proprietary set-top box, and the (now-bankrupt) electronics retailer failed to persuade Hollywood studios to get on board.

“That failed immediately,” Mr. Kugler recalls.

The success of Internet music downloading has been a boon for DVA’s CD business; this year marks the first time CD sales have been on par with those of DVDs.

Mr. Kugler speculates that the next casualty of the Darwinian format churn will be the standard DVD; in the not-too-distant future, he says, Blu-ray will rule the home-video universe.

Hollywood sees Blu-ray, whose picture quality can’t be downloaded via the Web, as the ultimate antidote to the poison of piracy - a solution that so far has eluded the music industry.

If and when standard DVDs find themselves on life support, a couple of warehouses in Tampa are ready to provide technological hospice care.

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