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2001 Rentals Surge for First Time in Two Years

11 Jan, 2002 By: Melinda Saccone

The video rental industry posted a gain for the first time in two years in 2001 thanks to the explosive growth of the DVD format, which offset the decline in VHS rentals.

Warner Home Video squeaked out a first place win in the rental market share race that was settled by late fourth quarter returns. While the race for market share was tight, 20th Century Fox Home Entertainment's Cast Away was the clear winner at the rental counter in 2001, with $102.3 million in rental revenue.

U.S. consumers spent a record $10.03 billion on VHS and DVD rentals in 2001—up 6 percent from the 52-week comparable period in 2000. New releases accounted for almost three-quarters of all rental transactions in 2001.

Video Store Magazine market research estimates that the total home entertainment market, including rental and sellthrough revenue, will settle at around $22 billion.

Despite a depressed economy, the rental industry has historically been resilient to negative economic shocks that adversely effect almost all other industries. While most stocks plummeted in the wake of the economic environment, the public rental chains were big winners as consumers continued to rent and buy videos. Blockbuster Inc.'s stock was up 200.9 percent at year's end, closing at $25.95. Hollywood Entertainment Corp. closed the year at $14.29—up a whopping 1,244.9 percent—and Movie Gallery closed at $24.36—up 1,046.4 percent.

Consumer spending on DVD rentals exploded to an impressive $1.5 billion in 2001, generating 147 percent more revenue than in the comparable 52-week period in 2000. DVD rentals accounted for nearly 15 percent of total rental revenue in 2001, up from 6.5 percent in 2000. The rental surge may be a factor of the growth of DVD hardware; the year-end report issued by the Consumer Electronics Association states sales of 12.7 million DVD hardware units to dealers in 2001, up 49.5 percent from the previous year.

Consumer spending on VHS rentals declined a slight 3.6 percent from the comparable period in 2000 to $8.53 billion. While growth in the DVD rental market is definitely on the rise, VHS still constitutes the majority of rental revenue. VHS rentals accounted for 85 percent of total rental spending for the year.

Suppliers gave each other a run for their money in the rental market share sweepstakes. While Warner and Columbia TriStar Home Entertainment dueled for top honors in the market share sweepstakes, Buena Vista Home Entertainment and Universal Studios Home Video finished in a dead heat for the No. 3 spot.

Warner eked out a first place finish, capturing 18.8 percent of all rental transactions in 2001. Warner includes New Line and HBO product. Warner's Exit Wounds (No. 15) was the studio's top renting release of 2001. The actioner earned $62.9 million in combined DVD and VHS rental revenue in its first four months out.

Columbia TriStar Home Entertainment came in a close second, with a 17.7 percent market share. Columbia's top performer at the rental counter was Crouching Tiger, Hidden Dragon (No. 3), which earned $89.6 million in its first 117 days of release.

Buena Vista and Universal were in a dead-heat for the show spot (No. 3), each capturing a 16.9 percent market share. Buena Vista tallies include Dimension, Disney, Hollywood, Miramax and Touchstone titles, while Universal includes DreamWorks Home Entertainment releases. Buena Vista's Unbreakable (No.2) pulled in an impressive $96.9 million in rental revenue, while Universal's Meet the Parents (No. 4) made $89.1 million in rental revenue its first four months of release.

Comedies were king in 2001. The genre captured 34.2 percent of all rentals last year, with Meet the Parents topping the tummy-ticklers. Dramas finished second, with 23.3 percent. Fox's Cast Away, the top rental in 2001, was also the top drama.

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