Home Entertainment Spending Drops 3.6 Percent Second Quarter

2:27 PM PST 08/05/2011 by Thomas K. Arnold

But the decline is less than the 6.4 percent drop in the first quarter.

Hollywood is breathing a little easier as an unexpected recovery came to the disc-based home entertainment business in the second quarter of this year.

Total consumer spending on home entertainment appears to have stabilized, with a second-quarter decline of just 3.6%, to $3.99 billion from $4.14 billion in the second quarter of 2010, according to numbers compiled by DEG: The Digital Entertainment Group. Spending fell 6.4% in the first quarter of the year.

For the six months that ended June 30, consumer spending fell 5% from spending in the first half of 2010, to $8.34 billion from $8.78 billion. The drop is softened by the fact that the box office value of movies that were released to the home entertainment market, chiefly on DVD and Blu-ray Disc, was down 16% from the comparable period last year. Q2 numbers for 2010 also were skewed by the April 2010 release of 20th Century Fox Home Entertainment’s Avatar, the top-grossing movie of all time, which has sold more than 12 million discs.

Disc sales were off 16.3% in the second quarter of 2011, to $1.8 billion from $2.15 billion, while electronic sellthrough was down 2.17%, to $129.75 million from $132.63 million in the second quarter of 2010. Rental – including streaming and VOD – was up 11.16%, to $2.06 billion from $1.85 billion.

For the first half, consumers spent $4.2 billion on transactional video – disc rental, streaming and VOD – which is nearly 11% more than they spent in the first six months of 2010. Consumer spending on DVDs, Blu-ray Discs and EST, combined, was off 17.15%, to $4.14 billion.

The biggest loser in the home entertainment arena was brick-and-mortal rental, stung by the bankruptcy sale of Blockbuster Video, once the sector’s 900-pound gorilla. Rental revenue fell 29% in the second quarter after dropping 26.9% in the first quarter, leaving total year-to-date spending as of June 30 at $896.5 million, down from $1.24 billion in the first six months of 2010.

Subscription rental, chiefly from Netflix, rose 45.7% in the first six months of this year, to $1.56 billion from $1.07 billion in the first six months of 2010, although year-to-year numbers are somewhat skewed by the fact that for much of the period Netflix offered a combination disc-and-streaming package to its subscribers.
Kiosk rental, mostly from Redbox, rose 39.8% in the second half, to $805.6 million from $576.4 million in the first half of last year.

Spending on Blu-ray Discs was up a solid 10% in the first half. DEG estimates that the number of U.S. households with at least one Blu-ray Disc playback device rose 16% in the first six months of 2011 to bring total household penetration to more than 31.6 million, making the format one of the fastest-growing new technologies in the home entertainment industry. At the end of the first quarter the total stood at 29.6 million households.

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