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DVD in the Shadows?

11 Jan, 2006 By: Holly J. Wagner

We've all endured the reports of slowing DVD sales and rentals falling off a cliff for 2005. The big chains have yet to report their fourth quarter results, so I'm sure we have not heard all the bad news yet.

But I'm not so sure DVD sales have really slowed. I'm thinking its only new DVD sales that have slowed.

Some of the research companies like Rentrak and Videoscan have been trying to get a handle on the scope of the used disc market, but I think the channels are too diverse for them to ever really do it.

Follow along: In the last 12 to 18 months, every major entertainment chain that wasn't already there has gotten into used disc buying as well as selling.

Trans World's FYE and Wherehouse (and I believe most of its other brands) were pretty early into the game because they had already been doing it with CDs. Blockbuster, Movie Gallery/Hollywood Video, Musicland's Sam Goody and Suncoast, Hastings, GameStop is opening Movie Stop stores left and right, starting in the Southeastern states (the company is having a boom in Florida these days). Chains like PrePlayed and now Blockbuster-owned Movie Trading Company and Web sites like Djangos.com and Uzed.com have gotten in.

Netflix began selling its PVTs to consumers, even though it does not buy from them. Even Best Buy has begun dabbling in used games, so DVDs would seem to be the next logical step there. And again the Web is fertile ground for sites like peerflix.com, barterbee.com and umdtrader.com, which let consumers trade. Even Redbox may start testing used sales.

I've been saying that this would catch on and, eventually, take a bite out of new disc sales, especially when the economy started to tighten up. It took longer than I expected for that to happen, but I think the daily announcements of job cuts at U.S. companies are looming large on the horizon.

Back in November 2003, Blockbuster CFO Larry Zine estimated on an analyst call that 25 percent of the DVDs sold in the U.S. were used. It seems likely that with all the new players getting into the trading arena, that percentage must have gone up. It has probably also replaced a measurable amount of rental trade, since the used disc purchase could replace a new sale or rental.

Until someone gets a handle on reliable measurement tools and models for the used disc trade, we won't know for sure. But the public does not seem any less DVD-crazy than they have been in other recent years. I think they are just getting smarter about how much they pay for their habit.

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