DVD industry down, but not downbeat

Wed Dec 23, 2009 1:32am EST
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By Thomas K. Arnold

LOS ANGELES (Hollywood Reporter) - To outsiders, the DVD business appears to be in the toilet -- so why are home-entertainment honchos smiling?

At the end of the third quarter, DVD sales were running about 13% behind last year, and even a fourth-quarter bump isn't expected to bring that gap down by much once the final numbers for 2009 are tallied.

And yet studio executives aren't nearly as glum as they were a year ago, when DVD sales were running 5% behind the previous year. What gives?

The recession, for one. The closing months of 2008 saw the banking and auto industries all but collapse, the jobless rate skyrocket and home foreclosures go through the roof. DVD sales might have plummeted this past year, but hey, so did everything else.

Even more significant is the realization that the old way of looking at things isn't necessarily the only way, or even the right way. Although DVD sales have fallen steeply, rentals -- spurred by a robust Netflix and Redbox kiosks -- have risen sharply, with an 8.2% uptick in the first nine months of 2009, according to Rentrak's Home Video Essentials.

Indeed, factor in dramatic gains in Blu-ray Disc sales and digital delivery, and consumer consumption of home entertainment might be at an all-time high -- a point alluded to three months back when the Digital Entertainment Group released those third-quarter numbers. According to DEG's figures, overall consumer home video transactions were up a solid 6.6% from the previous year.

"It's been a roller coaster of a year, but consumer demand for content is as strong as we've seen it," said Ron Sanders, president of Warner Home Video. "Rental activity has gained in this economic environment, which you'd expect, but so have Blu-ray and high-priced catalog sets. And digital continues its very strong growth."

The fact is, DVD is now a mature format -- it will officially become a teenager next year, celebrating its 13th birthday in March -- and much of the catalog that fueled early growth has been exploited. Consumers now own most of what they want to keep in their home libraries and have returned to renting what they merely want to watch, especially with the economy dinging paychecks.   Continued...