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Analyst: Up to 5% 2008 DVD Sales Decline Likely

12 Mar, 2008 By: Erik Gruenwedel

Citing a dearth of catalog DVDs and a drop in TV DVD sales, New York-based Pali Capital Inc. projected packaged media sales in 2008 would fall up to 5%, compared to a decline of 2% in 2007.

Total DVD revenue is expected to top $22.2 billion, compared to $23.2 billion in 2007.

Analyst Richard Greenfield, in a research note, said the protracted format war between HD DVD and Blu-ray exacerbated the situation. He nonetheless expects Blu-ray movie sales to triple in this year.

In addition, Greenfield said Wal-Mart Stores Inc. have begun reducing the number of low cost DVD dump bins in stores, which he said puts added pressure on catalog but benefits home entertainment in the long term.

The analyst is paid to cover the retail behemoth.

“Studios that have relied heavily on deeply discounted catalog sales will be negatively impacted in 2008,” Greenfield wrote.

The analyst said the expected plus with Blu-ray's win in the format war could be undermined by bandwidth increases offered by cable and telecommunication companies for video distribution.

He said the ongoing evolution of downloads and ad-supported streaming “cannot be positive long-term for the physical formats such as DVD.”

Finally, Greenfield said studios inserting digital files with DVDs remain a work in progress.

“It remains to be seen whether consumers will pay more to purchase a movie that is simply packaged in multiple forms on a DVD,” he wrote.

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