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DEG: Home Entertainment Fares Better Than Retailing Overall

7 Jan, 2010 By: Thomas K. Arnold

Home entertainment is weathering the recession better than retail overall, according to final figures for 2009 released by DEG: The Digital Entertainment Group.

Consumer spending on packaged media and digital delivery for the year came in at $20 billion, just 5% less than in 2008. This compares favorably to general retail sales, which slipped 6.3% in 2009, according to Wells Fargo Securities.

Even more telling, according to DEG, is that consumer transactions for the year rose 2.8% to 3.5 billion.

“The home entertainment business is doing remarkably well, given the overall economic environment,” said DEG president Ron Sanders, also president of Warner Home Video.

Consumer spending on packaged-media sales and rentals for the year is estimated at $17.9 billion, 7.3% less than in 2008, according to figures compiled by DEG on behalf of the studios. Total annual spending on disc purchases was down 13% to $11.4 billion, while the rental sector, fueled by the rise in kiosks, posted an annual spending total of $6.5 billion, up 4.2%, according to Rentrak Corp.’s Home Video Essentials.

Steeper declines in DVD (10.9% sales and rental combined) were partially offset by significant gains in Blu-ray Disc, which saw consumer spending on sales and rentals more than double to a record $1.5 billion. Consumers spent more than $1 billion on Blu-ray Disc purchases alone, according to the DEG.

DEG chairman Bob Chapek, also president of distribution for The Walt Disney Studios, said the figures clearly show Blu-ray Disc “is well on its way to mainstream consumer adoption.”

“With the industry’s recent finalization of 3D specs,” he added, “next year promises to be an extraordinary year for consumers to experience the expanded possibilities of Blu-ray.”

According to DEG figures, Blu-ray Disc sales were up 70% and rentals were up 48% from the previous year. In the fourth quarter alone, Blu-ray Disc sales generated more than $500 million, representing 13.4% of the total spent by consumers on buying discs. Sales of new Blu-ray Disc releases in the fourth quarter were up 35%, DEG reported, while sales of catalog titles doubled from the fourth quarter of 2008. Five Blu-ray Disc releases sold in excess of 1 million units, including Snow White and the Seven Dwarfs, from Walt Disney Studios Home Entertainment, which DEG listed as the top-selling Blu-ray Disc release of the year.

The DEG also estimates that the number of Blu-ray Disc playback devices in U.S. households, including both dedicated set-top players and PlayStation 3 game consoles, soared to 17 million in 2009, up 76% from the total at the end of 2008. Consumers in the fourth quarter alone bought about 4.5 million playback devices, bringing the total for the year to nearly 8 million.

Digital delivery also posted gains, thanks largely to an increase in digital homes and the broader availability of video-on-demand (VOD) on the same day the DVD and Blu-ray Disc is released. DEG figures show consumer spending on digital delivery rose 32% to $2.1 billion, with VOD growth accelerating 63% in the fourth quarter, compared to 20% in each of the three previous quarters.

Note: Consumer spending totals for 2008 previously had been reported at $22.4 billion, but Rentrak subsequently revised downward its rental estimate for the year from $7.5 billion to $6.2 billion.

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