Home video biz holding up

DVD, Blu-ray sales strong despite down economy

Data from DVD and Blu-ray Disc sales and rentals shows the home video business is holding up well despite the down economy, the high price of gas and any consumer shift toward the Internet.

Consumer spending on DVDs and Blu-ray in the first six months of the year, purchases and rentals combined, was up 1.6% from spending in first-half 2007, according to Home Media Magazine's market research department. The first-half 2008 tally: $10.77 billion, compared with $10.6 billion a year ago.

Spending on disc purchases rose 1.1%, from $6.8 billion to $6.87 billion. Rental spending rose 2.6% from $3.8 billion in the first six months of last year to $3.9 billion, according to Home Media Magazine market research calculations.

Unit sales were up a healthy 1.1% as well, with consumers buying an estimated 412.3 million discs in the first six months of the year, up from 407.9 million discs in first-half 2007, according to studio reports.

Home entertainment industry analyst Tom Adams isn't surprised about the continued health of the packaged media business, despite Wall Street's negative perceptions.

"Most analysts are techno-geeks with plenty of money and not much time, while most Americans are not technically savvy, and they have plenty of time but not much money," said Adams, president of Adams Media Research. "The fact is, despite what many on Wall Street seem to think, there is very little digital downloading going on. We're talking about $118 million in 2007 spending, and about $254 million this year -- so against a $24 billion packaged media market it's really not making much of a dent at this point."

Blu-ray sales alone should amount to at least three times what digital downloading is expected to bring in this year. In the first six months of the year, consumers spent $194 million on Blu-ray purchases, according to studio estimates -- a gain of nearly 350% from the $43 million that came from HD disc sales in the first six months of 2007, when growth was stymied by a format war between Blu-ray and rival HD DVD.

Unit sales of Blu-ray Discs in first-half 2008 were up 340% from the first six months of 2007, according to Nielsen VideoScan data. Nielsen numbers are based on point-of-sale data from most big retail chains with the notable exception of Wal-Mart and Sam's Club. Factoring in Blu-ray Disc sales at those two retail chains, studio estimates peg the number of Blu-ray Discs sold in the first six months of this year at 7.4 million units.

Adams said he expects the packaged media business to be more resilient than other businesses during the tough economic times the country is facing. He notes that in the early 1990s, the last time the country faced a recession, the video-rental business held its own. Today, the home entertainment business relies mostly on sales rather than rentals, he said, "so the question is will the $15 movie be as recession-proof as the $3 rental was in the last serious recession -- and why wouldn't it be? When you're cutting back on luxury items like trips to Hawaii and Europe, and lots of other stuff that has to get cut because of the high price of gas, buying a $15 movie to watch over and over again and add to your collection seems to be a great alternative to more expensive ways to entertain."

The year's top-selling DVD was 20th Century Fox's "Alvin and the Chipmunks," which sold about 5.3 million units, according to Home Media Magazine market research estimates. Disney's "Enchanted" was second, with an estimated 4.8 million units, followed by Warner's "I Am Legend" at No. 3 (4.2 million units), Paramount's "Bee Movie" at No. 4 (3.9 million units) and Disney's "National Treasure 2: Book of Secrets" at No. 5 (3.8 million units). These figures do not include sales to rental dealers, which can boost total unit sales significantly; all in, "Alvin" has sold more than 7 million DVDs.

The top five renters: Lionsgate's "3:10 to Yuma" at No. 1, followed by "I Am Legend" at No. 2, Paramount's "No Country for Old Men" at No. 3, Universal Studios' "American Gangster" at No. 4 and Lionsgate's "Good Luck Chuck" at No. 5.

"I Am Legend" is the top-selling high-definition disc release of the year, with unit sales of 305,000. Next comes "National Treasure 2: Book of Secrets," with unit sales of nearly 145,000, followed by "No Country for Old Men" (137,000 units), No. 3; Warner's Blu-ray Disc release of "300" (133,100), No. 4; and "3:10 to Yuma" (115,000), No. 5.