DVD sales surge no match for VHS erosion


LAS VEGAS -- As expected, an exceptionally strong fourth quarter propelled consumer spending on DVD sales and rentals in 2006 to record heights, while the VHS death-march drag kept overall home entertainment spending flat with last year.

Combined DVD and VHS purchase and rental spending came in at $24.2 billion, just below the $24.3 billion consumers spent in 2005, according to numbers compiled by DEG: The Digital Entertainment Group and released Monday during the Consumer Electronics Show.

DVD sellthrough spending rose to $16.6 billion from $16.3 billion in 2005, while DVD rental spending grew to $7.5 billion from $6.5 billion. Both are record highs.

Dragging down overall home entertainment spending totals was the VHS phaseout. VHS spending, sellthrough and rental combined, eroded to a mere $1 million in 2006, the DEG estimates. In 2005 VHS spending accounted for $1.5 billion, less than half the $3.3 billion videocassette sales and rentals generated in 2004.

DEG numbers are based on studio and retailer data.

An estimated 31 million U.S. households now have an HDTV set, the new DEG data shows, 12.5 million of them coming online in 2006. Nearly 5 million HDTVs were sold in the fourth quarter alone, DEG said, citing data from the Consumer Electronics Association (CEA), retailers and manufacturers. About 11% of HDTV owners have more than one set.

Sales of next-generation, high-definition media devices -- HD DVD and Blu-ray Disc combined -- exceed 750,000 units, according to DEG. That figure includes dedicated set-top players as well as game consoles. Sony's PlayStation 3 comes with a built-in Blu-ray drive, while Microsoft's Xbox 360 has an HD DVD add-on.

On the eve of its 10th birthday, DVD is now fairly ubiquitous, DEG reports, with 88 million U.S. households now having at least one DVD player. An estimated 33 million DVD players were sold this year, 11 million in the fourth quarter. Since the format's 1997 launch, nearly 200 million DVD players, including set-top, portable and TV combo devices, have been sold to U.S. consumers. DEG estimates 55% of DVD owners have more than one player.