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Home Entertainment Spending Rises for First Time in Five Years

DVD Packing Factory - H 2012
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The Digital Entertainment Group released the final home entertainment spending numbers on the eve of the International Consumer Electronics Show.

LAS VEGAS -- Consumer spending on home entertainment in 2012 rose for the first time in five years, coming in at an estimated $18 billion, DEG, The Digital Entertainment Group, reported this morning.

The news, released on the eve of the International Consumer Electronics Show, was met with a collective sigh of relief from the Hollywood studio executives gathered here for the show, as it reverses a downward trend that had plagued the industry since 2007.

The lift is not much -- just under a quarter percentage point, according to DEG -- but the fact that consumers are once again spending more on home entertainment than they did the year before is certainly cause for optimism, particularly because the steady erosion of packaged media sales, seen by the studios as the most important metric, has slowed significantly from the double-digit drops of recent years.

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DEG numbers show consumer spending on packaged media purchases -- DVD and Blu-ray Disc combined -- was down just 5.5 percent, to $8.46 billion. With electronic sell-through factored in, content sales topped out at $9.27 billion, just 2.9 percent less than last year.

The total spending gain is attributed to continued gains in Blu-ray Disc sales, subscription streaming and electronic distribution.

The DEG reports spending on Blu-ray Discs was up a healthy 10 percent, led by a 25 percent uptick in spending on catalog titles. The number of Blu-ray Disc households rose 7 percent during 2012, to 51 million.

The DEG also reports that electronic sell-through -- digital download purchases -- rose 34.6 percent during the year, to $811 million.

Total electronic distribution was up 28.5 percent for the year, to nearly $5.13 billion. That's nearly 30 percent of the home-video market, up from 19 percent in 2011. Electronic distribution was led by a 45.8 percent spending hike on subscription streaming, to $2.34 billion, and a 10.8 percent gain in video-on-demand, to $1.98 billion.

DEG also reports that UltraViolet registrations have surpassed 9 million. UltraViolet is a studio-backed initiative to boost disc sales by providing disc buyers with a digital locker to store their purchased content in the cloud. It's seen by many as the ultimate "added value" to disc purchases, since it allows consumers to access their purchased content anytime, anywhere, on a wide variety of devices, from smartphones to tablets.

"It's exciting to see how the growth of the new businesses is offsetting the natural decline of DVD," said Ron Sanders, president of Warner Home Video. "It's the collective benefit of great growth from EST, VOD and Blu-ray that has allowed us to stabilize. I think we're poised to get back to growth."

The only aspect of the home entertainment business that continues to operate under a dark cloud is traditional disc rental. DVD and Blu-ray Disc rentals at brick-and-mortar video stores fell 24 percent during 2012 to $1.22 billion, while subscription disc rental -- largely through Netflix -- was off an estimated 27.8 percent, to $1.26 billion. But even in rental, there was a bright spot: kiosk rentals, mostly through Redbox, rose 15.6 percent in 2012 to an estimated $1.94 billion.