The worst recession in decades took its toll on U.S. home entertainment spending in 2008, as it did on virtually every consumer goods category. Although not proving recession-proof, the home entertainment industry did show some resilience, with consumer spending on rentals and purchases of DVD and Blu-ray Disc falling a relatively moderate 5.7% to $21.7 billion, according to VB analysis of data provided by major studios.
In addition, consumers spent $488 million on digital rentals and purchases of films and TV shows over the Internet, according to Adams Media Research, up 73% from 2007.
When digital, including cable VOD, is factored into the 2008 picture, home entertainment consumer spending was off just 3.5% from the prior year, according to studios. Although consumer spending on DVD rentals at bricks-and-mortar stores, kiosks and online was flat at $7.6 billion, rental transactions inched up 1.8% to 2.6 billion, according to Rentrak.
Meanwhile, consumer purchases on both formats slid 8.5% to $14.1 billion, with Blu-ray’s exponential sales growth unable to fully counterbalance slippage of more than 10% in DVD sales.
Fourth-quarter new release spending alone dropped about 15% from 2007, according to Sony Pictures Home Entertainment.
Blu-ray sales represented about $750 million in 2008, according to studio estimates. Adams Media Research, however, put total spending on the format higher, at $901 million, including $270 million in rental.
Studio video chiefs acknowledge that the overall drop in consumer spending is the steepest year-to-year slide for the home entertainment industry since DVD launched in 1997. But the important thing, they say, is to keep this performance in the right perspective.
“This is a down year in the worst economic situation since the Great Depression, and with DVD maturing and still being in the early phases of Blu-ray, we feel really good about our position,” Warner Home Video president Ron Sanders said. “The economic crisis did seem to have some impact on our DVD business, where it hit certain titles and didn’t hit others, but in general, we felt the year went pretty strong.”
Warner’s The Dark Knight, released in December, is poised to become the studio’s No. 1 or 2 seller of all time, even though it launched as layoffs and home foreclosures steadily mounted nationwide.
Nevertheless, the year’s relatively light holiday retail traffic did have an adverse effect on DVD.
“Since we are a high impulse category, we have fewer opportunities to convert people,” Universal Studios Home Entertainment president Craig Kornblau said. “There are less people going to retail. And there is no question that this is challenging.”
Studios are determined to make the most of the upside potential in Blu-ray and digital formats.
“Digital [Web-]delivered revenue has been doubling for us each year, and it will double again in 2009 over 2008,” said Steve Beeks, Lionsgate president and co-chief operating officer. “I think it’s definitely becoming easier for people. Broadband speeds are increasing. And the PlayStation 3 and Xbox 360 have very healthy businesses.”
Consumers downloaded more than 2 million episodes of Lionsgate’s TV shows Mad Men and Weeds. On the film side, certain Universal titles, including Forgetting Sarah Marshall and Mamma Mia!, scored a milestone 100,000 download transactions each.
Beeks said that Lionsgate will keep nurturing its digital business by doubling the 450 available studio films for download/streaming in 2009. Currently, the studio holds 10,000 titles in its library.
Although Blu-ray is not growing fast enough to stem growth losses from standard DVD, studio chiefs are pleased with the traction Blu-ray is gaining with consumers.
“We have definitely seen more families embrace Blu-ray technology this year more than ever,” said Lori MacPherson, Walt Disney Studios Home Entertainment general manager of North America. “While there has certainly been a strain on the overall economy, especially for consumers, home entertainment still provides an economical and affordable choice for families.”
The studio believes its WALL-E was the year’s third best-selling Blu-ray, behind No. 2 Iron Man (Paramount Home Entertainment) and No. 1 The Dark Knight.
Studios also claimed individual 2008 victories. Paramount landed the most titles in the year’s Top 10 bestsellers: Iron Man, DreamWorks Animation’s Kung Fu Panda, Indiana Jones and the Kingdom of the Crystal Skull and Bee Movie. Sony’s Hancock enjoyed persistent fourth-quarter sales, with a decay curve that was less than normal for most titles, according to the studio.
The general consensus is that 2009 will be a transition year, with another single-digit percentage setback in DVD/Blu-ray spending. Studio chiefs are cautiously optimistic that the industry should rebound to growth in 2010.
Blu-ray titles will have another strong year, lifting to $1.5 billion to $2.5 billion in 2009 revenue, according to Warner. That would mark at least double 2008’s haul.
For the overall industry, “we project a low-to-mid single-digit decline in the 3% to 6% range [excluding digital],” Warner’s Sanders said. “That does depend on how well Blu-ray can offset the natural decline of DVD. I think the wild card is the economy.”
Sony president David Bishop added,” We were pleased with the growth rate out of Blu-ray, and we are projecting it will continue to be a bright spot for the industry. But there is no question that people are buying less across the board.”[Source from: videobusiness.com]
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