When The MuVi Service started installing ATM-like machines to rent films at grocery stores and gas stations in 1998, DVDs were less than a year old.

At the time, there was no guarantee that DVDs wouldn't go the way of LaserDiscs, which look like LP-sized compact discs and produced sharper sounds and crisper images like DVDs, but never caught on with consumers.

Recently, one of the MuVi Service's owners, Nicholas Weare, said the company is probably losing some business because, unlike traditional movie stores, it does not yet rent DVDs. The company anticipates upgrading its five machines so they can dispense DVDs in addition to VHS cassettes, and has brought in two machines equipped to handle DVDs.

"We've always had DVD on our mind," Mr. Weare said. "It was just a question of when DVD gets to a stage of critical mass."

Judging by sales of DVD players, it seems the format is fast approaching that point. The Consumer Electronics Association, which gauges the sales of audio and video equipment to dealers in the United States, estimates that this year manufacturers will ship more DVD players and recorders than video casette decks, which have dominated home entertainment for the past two decades.

In 1997, the year DVD entered the consumer market, manufacturers shipped 349,000 DVD players. In 2000, sales had risen to 8.5 million, and for this year the CEA predicts a figure double that amount, not including the DVD machines included in most new computers. VCR shipments peaked in 2000, when 23 million were sold and this year, even as the average price of a VCR continues to get cheaper, the CEA expects the number of units sold to decline to 14.5 million.

M&M International, a Bermuda electronics retailer, began selling DVD players three years ago. Since then, the shop's sales of DVDs have doubled, according to General Manager Don Correia, while sales of VCRs are off 25 percent this year over last.

The store now sells eight times as many DVD players as VCRs, and Mr. Correia estimates that most households now have a DVD player, although no such statistics are compiled. He attributes part of the growth to the declining prices for DVD machines - the first players sold for about $500; today, the cheapest DVD player costs $195.

DVDs - the acronym stands for digital versatile disc - produce pictures with twice the resolution of standard VHS and feature six channels of audio, allowing for a surround-sound effect. DVDs let users quickly jump between movie "chapters" and add extra features, including trailers, alternative movie endings and even games you can play on a computer.

The discs are also less susceptible to climate damage than video casettes.

"Especially for Bermuda, DVDs are definitely the way to go with the climate and the dampness," Mr. Correia said. "You don't have to worry about the problems that you have with conventional videotapes," he said, including mould growth and a picture that slowly deteriorates with replaying.

Leisure Time and Phase 1 Video said they sell more DVDs than VHS casettes.

Circuit City, America's second largest electronics retailer, has witnessed such a strong tendency towards DVD sales at the expense of video casettes that it has stopped selling prerecorded video tapes in some of its stores and will phase out sales at the rest of its 600 stores. The retailer will continue to sell blank VHS tapes.

None of the video retailers interviewed for this story had such drastic plans to overhaul their stock - at least not any time soon. Jan Hollis, the general manager of Leisure Time, explained that many children's films are produced on VHS exclusively.

The lack of titles available on DVD has also hampered the format's rise to dominance in the film rental market.

All of the video stores said their rentals remain tilted towards VHS.

"When it comes to what's available on DVD, they haven't even cracked it," said Mark DeSilva, a comanager of Phase 1. Only a few titles which pre-date DVD have been re-released on disc, and even then some video renters don't think replacing old videos with DVDs is worth the cost.

"I can go out and spend $20,000," said Robert Chandler, the owner of Vision Video, but he doesn't "see much point in buying stuff that people have seen on satellite or cable."

Mr. Chandler said he mostly rents VHS tapes, as did Ms Hollis of Leisure Time.

But while DVDs may not dominate rentals, the format is clearly gaining ground in that area, too. According to Mr. DeSilva, in the past six months, Phase 1 added six hundred titles to its DVD collection, which now number 1,200 and account for six percent of stock. But because DVD titles are concentrated among recent releases, they represent a quarter of the store's rentals.

Mr. DeSilva said DVDs, which are each about half the width of a VHS casette, allowed Phase 1 to stock more titles in less space.

DVDs will also allow the MuVi service to put more titles in its video machines. But Mr. Weare said the company was having difficulty finding a suitable location for the DVD-capable machines it imported about a year ago.

He wants to test the success of that machine before reconfiguring the five old ones, whose current bar-code system of cataloguing films as they are rented and returned is incompatible with thinner DVD cases.

Despite DVD's increasing penetration, the Consumer Electronics Association expects VCR decks to remain popular "for some time to come" because of the number of video casettes many households have accumulated.

According to the DVD Entertainment Group, VHS rentals and purchases totalled $10.8 billion last year compared to $6 billion for DVDs.

DVDs are not expected to replace VHS casettes as the main media for video until machines capable of recording them are standardised (there are various recording formats) and they become cheaper. Although prices have fallen significantly since Panasonic introduced the first DVD recorder in 2000 with a $3,999 price tag (in the US), the machines are still relatively expensive: M&M sells a Panasonic DVD recorder for $1,000.