Blu-ray boosts home entertainment industry

But sales and rentals still see 3% decline overall in Q3

The Digital Entertainment Group said Monday that revenue from sales and rentals of DVDs, Blu-ray Discs and digitally distributed content fell 3% during the third quarter to $4 billion.

The overall decline came despite surging Blu-ray revenue as sales and rentals of traditional discs continued to nosedive. High-definition disc sales climbed 83% as Blu-ray's installed U.S. base reached 11.7 million households, DEG said.

"Overall, the home entertainment window continues to show ongoing stability, given the current economic environment," the home entertainment trade group said.

Sales of DVDs and Blu-ray Discs declined 14% overall during the quarter, though Blu-ray sell-through revenue rose 66% to $161 million.

Digital distribution, including VOD and electronic sell-through, was up 18%, at $420 million. Rental spending climbed 10% overall, including a 44.5% surge by Blu-ray titles.

Consumer transactions rose almost 7% during the quarter in stark contrast to the overall revenue decline. The stat seemed to reflect the impact of cheap kiosk rentals on the marketplace.

"It's because of a shift toward kiosks, absolutely," analyst Tom Adams of Adams Media Research said. "Overall, the consumer is doing less buying and more renting."

DEG and Warner Home Video president Ron Sanders said the group was encouraged by "the dramatic growth of Blu-ray and the increases in digital distribution and rental in the third quarter."

The year's top-selling Blu-ray titles -- Fox Home Entertainment's "X-Men Origins: Wolverine" and WHV's "Watchmen" -- have registered 30% or more of their total revenue from high-def sales and rentals, officials said.

"Titles that appeal to the early-adopter demographic continue to perform increasingly well on Blu-ray," said Bob Chapek, DEG chairman and president of Walt Disney Studios Home Entertainment. "As the penetration of Blu-ray increases, we are beginning to see the same kind of response by mainstream audiences that we are seeing in early adopters."

DEG reports are based on data from member companies, retailers and industry tracking sources. Software revenue primarily is from films and TV shows; video games are not included in the data.