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DVD Channeling Sales and Profits on TV Fare

30 May, 2003 By: Thomas A., Judith M.

As the summer approaches, a bumper crop of TV shows and series are coming to DVD.

HBO has just come out with its fourth complete season of “Sex and the City,” while Fox will issue season four of “Buffy the Vampire Slayer” June 10. Universal Studios Home Entertainment is releasing two “premiere” episodes of “Law and Order” June 3, with more compilation discs slated for August.

And suppliers of all stripes continue to pump children's cartoons into the market, from Nickelodeon's popular “SpongeBob SquarePants” and “The Rugrats” to the Cartoon Network's “Super Friends” and “Justice League.”

Unit Sales of TV DVDs Soar
The DVD Entertainment group says TV shows on DVD is the format's No. 1 growth area, and now a detailed analysis of VideoScan data by Video Store Magazine's market research finds that unit sales of TV shows on DVD in 2002 soared a whopping 131 percent, compared with a still-respectable growth of 69 percent for DVD software sales in general.

The demand is certainly there, and so is the supply. According to the DVD Release Report, a weekly tip sheet, suppliers last year released 264 titles based on TV programming, more than 100 of them multidisc sets. In all of 1999, by contrast, there just 55 TV-based DVD titles.

So far this year, suppliers have released more than 150 DVDs of TV programming, boosting the total number of titles in the market to upwards of 900. The trend is toward complete-season sets, in which the difference in capacity and shelf space is most pronounced.

Typically, TV shows on DVD command a premium. While the average DVD in 2002 sold for $18.45, consumers shelled out an average of $28.41 for a DVD package of TV shows.

This 53 percent premium is due in large part to the proliferation of multidisc sets like “Band of Brothers,” the acclaimed HBO miniseries that retails for $119.99 and currently ranks at No. 2 on VideoScan's list of the top-selling TV shows on DVD.

Also scoring high on the sales chart are the three complete-season packages of another HBO series, “The Sopranos,” which carry suggested retail prices of $99.98 each.

On average, the top 10 sellers retail for $65.99.

20th Century Fox Home Entertainment is a clear leader in releasing TV shows on DVD; the studio was among the first to test the waters with its release of a boxed set of season one of “The X-Files” in the spring of 2000.

HBO is another winner in the category, releasing many of its pay-TV series on DVD and thus expanding its audience to nonsubscribers. It works the other way as well — HBO uses its high-profile DVD packages, including “Sex in the City” and “The Sopranos,” to promote its cable service and attract new subscribers.

“Early on, we recognized that what HBO has created in ‘The Sopranos' and ‘Sex In the City' are unique consumer franchises best presented in ‘whole season' form, because the story develops with each episode,” HBO Video president Henry McGee said. “The DVD format has made it possible for us to do so, both in terms of shelf space and because of all the extra features we are able to add.”

A Lucrative Profit Channel
Premium pricing and escalating demand translates into an increasingly lucrative profit channel for suppliers. Last year, TV-based DVDs accounted for just 3.8 percent of all DVD releases, but they generated about 10 percent of the $8.8 billion consumers spent at retail.

Mass merchants and “big box” club warehouse chains have emerged as the primary retail sellers of DVD, and TV programming is no exception. Sixty-four percent of the units sold in 2002 were purchased by consumers at discounters, according to Video Store Magazine's 2002 Consumer Home Entertainment Survey, a slightly higher percentage than overall DVD sales (60 percent). That translates into a 156 percent increase from 2001.

The top 10 sellers at mass merchants show how quickly mainstream America is transitioning to DVD. Five of the top sellers are geared toward families and children. The No. 1 seller is the complete first season of “The Simpsons,” the popular prime-time animated series that appeals to adults as well as kids. The average price of a top 10 DVD package of TV shows sold at mass merchants in 2002 was $36.99.

While the big discount chains are clearly in the lead, supermarkets are the fastest-growing retail category. Unit sales of TV shows on DVD nearly tripled in supermarkets between 2001 and 2002, rising 263 percent.

Here, the top sellers tend to be lower-priced impulse buys, geared toward kids. Buena Vista Home Entertainment's Ultimate Villain Showdown was the top seller on the list, while Paramount Home Entertainment's SpongeBob SquarePants took four spots on the top 10. The average suggested retail price: a low $19.29.

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