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2002 Sales Make It a Record Year for Home Video

16 Jan, 2003 By: Judith McCourt

Home entertainment had a record year in 2002. Consumers spent a whopping $21 billion buying and renting videos thanks to DVD, according to Video Store Magazine market research.

While rental revenue, like many other sectors in the economy, were pummeled in 2002 (see VSM, Jan. 12-18), video sales were hot, as consumers scooped up DVDs in unprecedented numbers.

Consumers doled out $12.1 billion buying videos in 2002, a 12 percent increase from the $10.8 billion they spent in 2001.

DVD was the mainstay of video sales in 2002. Disc sales for the year soared to $8.7 billion, up 69 percent from the $5.2 billion spent in 2001. The increase more than offset the decline in the cassette sales. For the 12-month period ended Dec. 31, sales of cassettes plummeted from $5.6 billion to $3.4 billion, a 39 percent decline.

DVD's popularity is driven by the unprecedented acceptance of the format by consumers. More than 25 million DVD players were sold to consumers in 2002, a 50 percent increase from 2001, according to figures compiled by the DVD Entertainment Group based on data from the Consumer Electronics Association, retailers and manufacturers. That brings the number of DVD households to more than 40 million. More than 10 million homes have two or more DVD players.

When you include DVD-ROM drives and DVD-capable video game machines in the mix, the number of DVD playback units in U.S. households soars to more than 95 million.

Since Video Store Magazine began to track DVD sales in 1998, disc sales have catapulted. In 1998, sales of discs totaled $400 million. By 1999, sales jumped to $1.5 billion and accounted for a little more than 15 percent of the overall $9.2 billion consumers spent buying videos. In 2000, DVD sales more than doubled, to $3.4 billion, and continued to climb. Although household penetration in 2001 hovered around one-quarter of U.S. households by year's end, DVD purchases accounted for almost half ($5.2 billion) of the $10.8 billion U.S. households spent on video purchases in the 12-month period.

Clearly, consumers value DVD. In a survey of 600 DVD households conducted by Video Store Magazine in the second quarter of 2002, DVD owners scored the value of a DVD purchase at 7.28 on a scale of 1 to 10, with 10 being the highest. DVD ranked higher than any other video entertainment option, including going to the movies, renting any format and buying VHS. At the end of 2002, 72 percent of the dollars spent on video purchases came from DVD.

According to Nielsen VideoScan data, 66 percent of the units sold to consumers in 2002 were in the DVD format. The average retail price of a disc in the fourth quarter of 2002 was $18.76, compared with $12.42 for a cassette, according to Nielsen data.

The top-selling disc for the year in unit sales, according to Nielsen VideoScan, was Columbia TriStar Home Entertainment's Spider-Man, which sold about 10 percent more units in DVD than the No.2 DVD finisher, Buena Vista Home Entertainment's Monsters, Inc.

Despite the decline in popularity of cassettes, they were the deciding factor for the 2002 best seller. Topping the VHS sales chart and taking overall honors as the best-selling video of 2002, was Buena Vista's Monsters, Inc. Finishing in the No.2 spot in VHS as well as overall sales was Warner Home Video's Harry Potter and the Sorcerer's Stone. Of the overall unit sales mix, 41 percent of Monsters' and Potter's sales came from cassettes, while third-place overall finisher, Spider-Man, pulled in just 25 percent of its overall unit tally from VHS.

Topping the sales charts did not translate to a win in the market share sales sweeps for the year. Warner Home Video handily won the sales sweeps. The supplier also claimed the rental and overall 2002 market share sweeps.

Warner Home Video products scooped up $2.8 billion, or 23.3 percent, of the overall dollars spent by consumers buying videos in 2002. When added to their rental take, Warner Home Video products, which include New Line and HBO, generated $4.6 billion of the $21 billion spent at retail in 2002. Nielsen VideoScan data shows that 22.4 percent of combined unit sales went to Warner and 68 percent of its 2002 unit sales came from DVD.

Buena Vista Home Entertainment placed No.2 in overall dollar sales and volume in 2002 as well as claiming the No.2 spot in the market share sweeps. A steady slate of releases with high consumer appeal on VHS as well as DVD handed Buena Vista 18.1 percent, or $2.2 billion, of the sales dollars spent at retail. In the overall sweeps, Buena Vista products grabbed $3.6 billion (17.2 percent) of the $21 billion consumers spent buying and renting videos.

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