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DVD Feels first sting of slipping sales

January 7, 2008

Could the luster be coming off the shiny DVD?

For the first time since the format was launched in 1997, consumers spent less on DVDs than in the previous year.

DVD feels first sting of slipping sales
By Mike Snider, USA TODAY

Could the luster be coming off the shiny DVD?
For the first time since the format was launched in 1997, consumers spent less on DVDs than in the previous year.

Total sales and rentals of DVDs amounted to $23.4 billion in 2007, about 3% lower than in 2006, according to industry figures that the Digital Entertainment Group will release today at the Consumer Electronics Show in Las Vegas.

The largest factor in the dip? Economic hurdles that challenged the home-video industry just as it did other businesses, says Amy Jo Smith, the group’s president. “Consumers have less disposable income, but they still choose to buy and rent DVDs,” she says.

Consumers spent $16 billion buying DVDs, about $600 million less than in 2006. But rentals matched last year’s total of $7.5 billion.

Hollywood shipped 1.7 billion discs — about 30 million more than in 2006 — a sign that DVD remains strong, Smith says. “There is a natural progression to lower price points due to the maturing market,” she says. “But there are still titles — big blockbuster releases, collector sets and, mostly, TV DVD compilations — that are generating high price points.”

The average selling price of a DVD dropped 0.5% to $14.63.

Despite the downturn in DVD sales, the $23.7 billion total spending on home video dwarfs Hollywood’s $9.6 billion box-office total for 2007.

Overall, about 90 million homes have a DVD player, 2 million more than in 2006. “But some lower-income homes rent DVDs because they don’t have the income to build a big library,” says Wade Holden, an entertainment industry analyst at research firm SNL Kagan. “Where the growth is really coming is subscriptions like Netflix and Blockbuster Online.”

He estimates that in 2008, such subscriptions will increase from $1.7 billion to $2.1 billion.

Another area of growth: the movie download market, which is expected to double from $689 million in 2006 to $1.6 billion in 2008, SNL Kagan estimates.

As for high-definition discs, so far they amount to about 1% of the home-video market (about $300 million). But many industry watchers expect that Warner Home Video’s decision to go exclusively with Blu-ray discs could end the nearly two-year-long format war with rival HD DVD — and spur consumer spending.

Phil Swann, publisher of TVPredictions.com, expects Warner’s move “to spark talks between Sony (Blu-ray)and Toshiba (HD DVD) for a negotiated settlement for a single format. … With one format, the industry can promote Blu-ray to the masses.”

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