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The Rise and Fall of Formats

1 May, 2005 By: Kurt Indvik

So it seems that VHS is now going to be disappearing from that quintessential middle America retail outlet Target by this fall. (See the cover story in this week's issue of Home Media Retailing).

And as we silently tip our hats to this fading format, we are also mindful of the maturity of DVD and its inevitable decline.

Certainly, the last nail is being driven into the coffin for VHS. According to Home Media Research, sales of the cassette for the first quarter of 2005 totaled $143.2 million of the total $4.3 billion (a record by the way) in sales of home video. VHS sales were down 53 percent. Even those VHS friendly genres of kidvid and fitness are predominantly DVD now.

Meanwhile, about 400 million DVDs were shipped to retail in Q1 of 2005, according to DEG: The Digital Entertainment Group, a growth of 22 percent over shipments in Q1 of last year. And DVD sales for this most recent quarter bested last year by 25.7 percent in reaching that record $4.3 billion. Not bad for a mature format in today's quickly evolving digital entertainment environment.

But there is also little doubt that DVD's maturation arc is topping out, at least in the United States. With U.S. household penetration now at an estimated 70 percent, it's not surprising to note that last year's DVD shipments in Q1 were 43 percent higher than Q1 of 2003. Also indicative is that DVD console sales dropped a precipitous 35 percent in the first quarter of 2005 compared to the same quarter sales in 2004, according to the Consumer Electronics Association. That, after a slide in DVD console sales in 2004 of 9 percent, compared to 2003.

There is no question that high def discs are a number of years away from mass-market adoption, even if there is a single format launch in 2006. But I think that DVD will also experience a much shorter period of decline toward a new format than it's predecessor VHS in an ever-quickening digital entertainment era.

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