DVD sales down, not out

When Joy Papa of Silver Lake stopped by Fry's Electronics in Burbank last week, she did something movie executives wish consumers would do more often this year: buy a DVD.

"Every time a new movie comes out that I like, I buy it even if I saw it in theaters," she said while clutching a copy of "Fast & Furious," which had just come out.

The DVD business may be down, but it's not out -- at least for the biggest titles.

Universal Pictures' April release of "Fast & Furious," the first movie this year to take in more than $150 million at the domestic box office, sold and rented a combined total of more than 3 million DVD units in its first week, the studio said.

Hollywood executives are closely watching "Fast & Furious" sales for signs of the strength of the home entertainment market in advance of the crucial fall and holiday season, when the summer's big movies are released on DVD.

The studios have historically depended on DVD sales to push such costly pictures into the black, but consumers have substantially cut back on purchases this year, undermining the economic model that has long supported the movie business.

"All eyes are going to be on these summer hits making it out on DVD this October, November and December," said Wade Holden, an analyst at SNL Kagan who studies the entertainment industry. "The last quarter is going to be very important."

Although overall ticket sales are down a bit from last year, a number of this summer's box office hits, including "Transformers: Revenge of the Fallen," "The Hangover" and "Star Trek," will soon be crowding the shrinking shelf space that retailers devote to DVDs.

DVD sales for "Fast & Furious," which began July 28, have been below those for 2001's "The Fast and the Furious" and 2003's "2Fast 2Furious," which each sold about 3.5 million DVD units in their first week. And 2006's "The Fast and the Furious: Tokyo Drift," which grossed only $62.5 million at the box office, sold and rented 2 million units its first week.

Although Universal surely isn't ecstatic to see the latest "Furious" movie sell fewer DVD units than its two predecessors that performed similarly at the box office, 3 million is a solid number given overall industry trends.

Total DVD sales were down 13.5% in the first half of the year, even accounting for the fast-growing Blu-ray segment, while rentals were up 8%. Blu-ray sales and digital downloads are rising fast but still represent a small portion of the overall market.

Universal declined to break down how many of the 3 million units were rentals and how many were sold to customers, and an executive wasn't available for comment.

Given market trends, however, it's likely the rental portion has risen compared with previous films in the series. That would depress overall revenue for Universal, given that the profit margins on rentals are lower than for sales.

Studios are highly protective about what DVD sales data they release publicly, especially if the numbers don't cast the most positive light. Warner Bros., for instance, declined to share any information on the performance of "Watchmen," which generated $183 million at the worldwide box office, when it launched on DVD two weeks ago.

Although retailers are cutting down on the amount of shelf space they allocate to DVDs, many Los Angeles-area stores appear to be selling "Fast & Furious" at or below wholesale cost.

At Best Buy in West Hollywood, the movie was in the front of the store on the morning it went on sale and cost $15 for the standard disc and $25 for Blu-ray. Typical wholesale prices for new movies are $18 for standard and $25 for Blu-ray. Target in West Hollywood sold the movie for $16 and $26, respectively, while at Fry's in Glendale the DVD cost $15 and the Blu-ray cost only $20.29.



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