Home ent. spending falls slightly in Q2

But kiosk rentals rise a hefty 55%

Consumer spending on recorded home-entertainment releases fell less than 1% in the second quarter year-over-year, shaving the industry's first-half decline to 3%.

Digital Entertainment Group's midyear snapshot shows a continuing falloff in DVD sales and the inability of the next-gen Blu-ray Disc format to compensate for that decline. But it also reflects the ascendancy of dollar-a-night disc rentals, as the revenue slide comes despite a 2% uptick in the number of home entertainment consumer transactions during the six-month span.

Rental spending was down 5% in the first half to slightly less than $3 billion, but kiosk rentals rose a hefty 55%, according to Rentrak data. Store closures throughout the Movie Gallery retail chain also hurt industry performance, DEG said.

The trade group said Blu-ray is showing increasing strength in the marketplace. But most analysts believe revenue from the HD format won't compensate dollar-for-dollar for DVD declines until sometime next year at the earliest.

"Blu-ray Disc continued its strong performance, with sell-through and rental reaching a combined total of $982 million for the first half of the year," DEG said.

The figure includes an 84% gain in Blu-ray Disc in the first half to $733 million. During the second quarter, Blu-ray sell-through rose a whopping 112% to $363 million.

But DVD declines were so severe that the combined packaged media sell-through decline exceeded 7% in the first half. Quarterly packaged-goods sales were off 3%.

Electronic sell-through rose 37% in the first half to $285 million, and VOD was up 19% to $865 million for a combined $1.1 billion in revenue from digitally distributed titles.

"The growth of Blu-ray, both hardware and software, continued to dominate the home entertainment landscape in the first half," DEG and Warner Home Video president Ron Sanders said. "Clearly, we are still grappling with a challenging marketplace and a tough economy. But overall the trends that we are seeing are encouraging."