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Home Entertainment Spending Gap Continues to Narrow

19 Oct, 2009 By: Thomas K. Arnold

The beleaguered home entertainment industry found more encouraging signs in the third quarter, with Blu-ray Disc sales continuing to post healthy year-over-year gains and the number of consumer transactions, led by robust rentals, rising 6.6%.  

Consumers spent an estimated $161 million on buying Blu-ray Discs in the quarter ended Sept. 30, 66.3% more than they did in the third quarter of 2008, according to numbers released Oct. 19 by DEG: The Digital Entertainment Group. That brings the purchase total so far this year to $568 million, 83% more than in the first nine months of last year.

The DEG also notes that based on numbers provided by the Consumer Electronics Association, Blu-ray Disc playback devices, both standalone players and PlayStation 3 consoles, are now in 11.7 million homes. An estimated 3.3 million players were sold in the first nine months of this year, 13% more than in the same period last year.

The rental sector also posted impressive gains. Consumer spending on disc rentals, thanks in large part to the proliferation of kiosks, rose 9.9% to $1.6 billion in the quarter that ended Sept. 30, according to Rentrak Corp.'s Home Video Essentials — with Blu-ray once again leading the charge with gains of 44.5%. As of Sept. 30, consumers have spent $5 billion on rentals this year, 8.2% more than in the first nine months of 2008. 

Digital distribution, both electronic sellthrough and video-on-demand, generated an estimated $420 million in the third quarter, up 18% from the third quarter last year. So far this year consumers have spent $1.4 billion on digital distribution, 20% more than they did in the first nine months of 2008.

Total consumer spending on all home entertainment — DVD and Blu-ray Disc sales and rentals, plus digital distribution — slipped just 3.2% in the third quarter of 2009 compared to the third quarter of last year, finishing at an estimated $4 billion, according to the DEG. Halfway through the year, spending was off 3.9%. The total spending tally for 2009, as of Sept. 30: $13.73 billion.

Sellthrough spending, the critical barometer by which studio executives as well as analysts measure the health of the home entertainment industry, was down 13.9% in the quarter, with declines in DVD sales partially offset by the uptick in Blu-ray Disc sales. 

Warner Home Video president Ron Sanders, president of the DEG, said he's "encouraged by the dramatic growth of Blu-ray and the increases in digital distribution and rental." 


The DEG numbers also indicate that Blu-ray Disc sales accounted for 12% of total consumer spending on new theatrical releases during the quarter. Two of the year's biggest sellers, Warner's Watchmen and 20th Century Fox Home Entertainment's X-Men Origins: Wolverine, generated more than 30% of total unit sales from the high-definition disc.




"Titles that appeal to the early adopter demographic continue to perform increasingly well on Blu-ray," said Bob Chapek, president of Walt Disney Studios Home Entertainment and chairman of the DEG. "As the penetration of Blu-ray increases, we are beginning to see the same kind of response by mainstream audiences that we are seeing in early adopters."



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