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Home Entertainment Holding Up Well, DEG Says

16 Jul, 2009 By: Thomas K. Arnold

Numbers released by an industry trade group show the home entertainment business is weathering the Great Recession remarkably well, although the troubled economy is prompting more consumers to return to their old habit of renting rather than buying videos.

Consumer spending on DVD, Blu-ray Disc and digitally distributed programming was off 3.9% in the first six months of 2009 from the first half of 2008, according to DEG: The Digital Entertainment Group, coming in at an estimated $9.73 billion.
Consumer spending on DVD and Blu-ray Disc purchases took the hardest hit, slipping 13.5% in the first half, largely due to a weak first quarter in which sales tumbled 15%. The first-half tally was further bolstered by a 91% gain in Blu-ray Disc sales (to $407 million) and a 21% rise in digital distribution spending (to $968 million, which includes $196 million for electronic sellthrough).
Rental spending, on the other hand, was up an impressive 8.3%, according to Rentrak, again boosted by a significant (62%) gain in Blu-ray Disc spending but also aided by the proliferation of rental kiosks.
“Despite an extraordinarily challenging marketplace, the home entertainment sector continues to be remarkably stable overall, particularly with the growth of higher-margin businesses like Blu-ray Disc and digital distribution,” said Warner Home Video president Ron Sanders, president of the DEG.
He notes that home entertainment’s net operating profit contribution was down just 2.2% in the first half of 2009, because the studios get a bigger cut from Blu-ray Disc and digital distribution sales than they do from standard DVD.
Blu-ray Disc software sales were up 91% at retail in the first six months of this year, according to DEG figures compiled by the DEG with input from suppliers and retailers. Nearly 20 million Blu-ray Discs shipped to retail in the second quarter of the year, according to figures compiled by Swicker & Associates on behalf of the DEG — 57% more than in the same period last year.
Also, Blu-ray Disc hardware sales exceeded 2 million units in the first half of 2009, up nearly 25% from the first half of 2008. The total installed base of Blu-ray playback devices in U.S. homes, including Sony PlayStation 3 video game consoles, is now estimated at nearly 11 million units.
Meanwhile, the number of high-definition households continues to grow, adding to Blu-ray’s potential customer base. According to figures compiled by the DEG and based on data from the Consumer Electronics Association, retailers and manufacturers, more than 10 million HDTVs were sold to consumers in the first half of 2009. That brings the household penetration of HDTVs in the United States to approximately 44 million, up 13% from the end of last year and representing 38% of all U.S. households.
Bob Chapek, president of Walt Disney Studios Home Entertainment and chairman of the DEG, looked at the numbers and sounded an optimistic note.
“The overwhelming satisfaction expressed by consumers with regard to Blu-ray shows great promise to the industry’s economic future and we are also optimistic regarding their appetite toward digital technologies,” Chapek said. “Both formats, converging together and resulting in one cohesive consumer experience, will present an opportunity for the industry to return to growth and eclipse our previous benchmarks.”

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