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April Rentals Flat Despite Bigger Box Office Punch

8 May, 2003 By: Melinda Saccone

Despite a stronger slate this year, April rental spending remained merely on a par with spending in the same month last year.

Consumers spent $655.1 million at the rental counter, down a scant 0.9 percent from the comparable four-week period in 2002.

Disc rentals accounted for 52.2 percent of total rental spending for the month, up from 37.5 percent in April 2002. Consumers spent $342.1 million renting discs in April, outpacing cassette rentals by 9.3 percent. DVD rentals posted a 51.5 percent increase from spending totals in April 2002, while VHS rental revenue declined 28.1 percent from last year, to $313 million.

While April offerings had a stronger box office punch than their 2002 counterparts, all of that gain can be attributed to Warner Home Video's Harry Potter and the Chamber of Secrets. Chamber earned an impressive $262 million in theaters. If you take Chamber out of the mix, the box office strength of April releases relative to last year was actually down by 4 percent.

Priced to sell on both VHS and DVD, Chamber had stiff competition at the sales counter in both formats, offsetting its success at the rental counter. The sequel earned $27.5 million in rentals in its first month of release, taking the No. 4 spot on the top rentals chart for the month.

Year-to-date spending on video rentals at the end of April registered $3.2 billion, up 1.8 percent from the $3.15 billion spent in the first four months of 2002.

Universal Studios Home Video's Red Dragon was consumers' rental of choice for the month, earning $36.5 million in its first month of release.

Universal, which also distributes DreamWorks product, took top honors in the market-share sweepstakes for the third consecutive month, generating 25.3 percent of all April rental transactions. Combined, the two studios had eight releases on the top 25 rentals chart for the month.

Warner Home Video, which also distributes New Line and HBO product, placed second in market share, with 23.1 percent of April transactions. Warner had five releases on the top 25 rentals chart for the month.

As more and more product hits the consumer market priced to buy, many rentailers are reaping the benefits. Thanks to DVD's lower price compared to rental-priced VHS, higher residual values, longer shelf life and lower impact on shelf space, rentailers have shifted their product mix to favor disc. Video Store Magazine market research estimates that for the top 10 April rentals, disc inventory accounted for 58 percent of all rental units in the marketplace. By comparison, 2002's top 10 counterparts averaged 36.5 percent.

According to a survey by VSM market research in April, new-release purchases in the disc format are nearing or have reached 50 percent for many rentailers.

On average, new-release purchases on disc are up by more than 50 percent from the comparable period last year. While the biggest rentailers purchase the highest percentage of new releases on disc, the smaller rentailers are quickly catching up.

DVD product accounts for 58.2 percent of new-release procurement for rentailers with more than 10,000 units in their rental inventories, up from 39 percent at the end of April 2002.

By comparison, rentailers who carry less than 5,000 units in their rental inventory on average purchased 47.5 percent of their new releases on disc, up from 31.3 percent in April of 2002.

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