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Hints of Good News for Disc

4 May, 2009 By: Stephanie Prange

stephanie prange

The disc business seems to be channeling Mark Twain. Reports of its demise have been exaggerated.

While the latest quarterly DEG numbers show that DVD shipments have indeed fallen off, Blu-ray Disc sales are starting to gain traction, growing 105% in the quarter and helping to lift home entertainment sales to a level just 5% below last year.

And that’s in the worst economy the home video industry has ever seen.

DreamWorks executives during the company’s first-quarter conference call were almost as ebullient over disc sales of Madagascar: Escape 2 Africa and other titles as they were over 3-D (that’s interesting considering CEO Jeffrey Katzenberg’s strong support of three-dimensional film).

“Even in the face of the recession, our titles continue to perform very well in home video,” Katzenberg said.
Time Warner CEO Jeff Bewkes also had something kind to say about home entertainment.

“Home video has improved somewhat since the fourth quarter,” he said, while acknowledging continued challenges.

Viacom blamed a home entertainment shortfall on fewer releases and the loss of income from HD DVD exclusivity, not so much a lack of consumer demand for disc.

We’ll see how the Disney and Fox home video divisions fair this week, but Pali Capital analyst Richard Greenfield, who lowered his income estimates for the two studios, placed the blame on theme parks and broadcast advertising declines — not on home entertainment.

Meanwhile, the video game business, oft cited as bucking economic downturns, took a double-digit percentage hit in March, falling 17%.

And Time Warner Cable reported a drop in fee-based video-on-demand.

The fact is if consumers have to pay for a product, that product won’t sell as well as it did last year in this economy. But if a product is free, it’s a different story. Witness Hulu’s growth through ad-supported free TV and Netflix’s free-streaming popularity.

In this economy, it seems the disc business is holding up quite well compared to other pay home entertainment. It may be a bit battered, but it’s alive and kicking.

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