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DVD's Double-Digit Gains May Be a Thing of the Past

20 Nov, 2003 By: Thomas K. Arnold

Are the glory days coming to an end? Once again, we're seeing record growth in DVD sales and the biggest home entertainment revenue pie in the history of home video, expected to top out at nearly $25 billion in consumer spending.

But privately, studio executives are a bit tempered in their enthusiasm. The United States added 17 million DVD households this year, the biggest jump ever, both in actual numbers and in percentage. Now that DVD has pushed its way past the 50 percent mark, however, don't expect to see such a dramatic rise, ever again.

That means come January, those of us expecting the growth curve to continue trending upward will be in for a big surprise. When January player sales reports come in, the total number of players sold might be lower than last January. And while software sales are expected to continue going up, the growth curve will likely begin to level out -- because no one has as voracious an appetite for DVDs as the household that's just bought its first player.

So that's my projection for 2004: flat or lower player sales, and just a slight uptick in software sales -- nothing like the double-digit gains we've seen each year since the format was launched.

Buy rates will likely stay strong, at least for awhile, but sooner rather than later we're going to see a decrease there, as well. Fewer new DVD households will be coming online, while existing DVD households will start running out of room.

Don't get me wrong -- DVD will keep the business strong for several years to come. The home entertainment pie will keep getting bigger, and buy rates won't ever sink to the levels they were in the VHS era, when at sellthrough's peak the average consumer bought five movies a year.

It's just that the increases won't be as significant as we've grown accustomed to.

Yes, folks, the novelty is beginning to wear off.

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