Home entertainment market shrinking slows as Blu-ray and digital help make up for DVD decline


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‘Down less’ is the new ‘up’ for Hollywood’s home entertainment business. Total revenue from DVD, Blu-ray and digital sales and rentals of movies and television shows in the U.S. declined 3% to $18.8 billion in 2010, according to new data from industry trade organization Digital Entertainment Group.

Although the drops, particularly of DVD sales, are worrisome for the entertainment industry, studio executives can at least take some comfort in the fact that the picture isn’t worsening as quickly as it did in 2009, when total home entertainment revenue plunged 7.6%.


The overall figures masked a number of disparate trends, however. Sales and rentals of high definition Blu-ray discs were up substantially and digital downloads and streaming were up significantly as well. But, the standard DVD format continued to fall even more substantially, with total revenue down 11% to $14 billion.

In the struggling economy, cash-strapped consumers continued to migrate away from purchasing movies and toward renting them. Rental revenue rose 2% to $7.8 billion, while sales were down 7% to $11 billion.

The total number of home entertainment transactions, including purchases, rentals and downloads, was virtually flat, up just 1% from last year’s 3.5 billion. In other words, consumers are watching just as many movies as ever at home--they’re just spending less to do it.

‘The industry is dealing with both structural and cyclical issues,’ said Tom Adams, principal analyst at IHS Screen Digest. ‘This year, as the economy improved, the cyclical factors eased up, which is why the market is fading less quickly. But the structural issue of people buying fewer movies remains.’

Total revenue from Blu-ray discs increased 53% to $2.3 billion. In the most promising news for the industry, Blu-ray sales rose an impressive 69% to $1.8 billion. Sales of Blu-ray discs, which usually cost more than $20, are the most profitable home entertainment transaction for the Hollywood studios.

Sales of movies via the Internet increased 17% to $683 million, while Internet and cable video-on-demand grew 21% to $1.8 billion. Studios are attempting to boost the still-small digital sell-through market through a new joint initiative called Ultraviolet, for which launch details were unveiled this week at Las Vegas’ Consumer Electronics Show.


DEG did not break out revenue from sales and rentals of standard DVDs, but Adams estimated that sales of DVDs, which fueled a boom in the home entertainment market between 1999 and 2005, fell 16% to $8.3 billion. That’s slightly better than the 17% drop in 2009.

The bestselling DVD of the year was James Cameron’s blockbuster ‘Avatar,’ which sold a total of 15.3 million units in the U.S. and Canada, including 5 million Blu-ray discs. The latter figure is an all-time record.

(This year’s decline was smaller than it would have seemed a year ago, as the DEG revised its 2009 sales figures down based on new data from Rentrak. After estimating last year that the home entertainment market was worth $20 billion, DEG now says the total was $19.4 billion, due to $600 million less DVD spending than previously reported.)

-- Ben Fritz