July 4 Discounting Hits More Lows7 Jul, 2006 By: Thomas K. Arnold
On the heels of a 3.7% decline in first-half consumer spending, DVD prices at retail hit new lows over the Fourth of July holiday, dimming hopes of an imminent recovery even if unit sales venture into positive territory.
Circuit City was selling dozens of popular DVD titles, mostly 20th Century Fox Home Entertainment and Universal Studios Home Entertainment titles such as X-Men, X2, Master and Commander and 8 Mile for $4.99, with a limit of three per customer. In the same circular, a batch of catalog CDs was advertised at the special discount price of $8.99.
Best Buy had such recent hits from Fox as Ice Age, Robots, Dodgeball and Napoleon Dynamite on sale for $6.99, and an assortment of other titles, including Moulin Rouge, Big Momma's House and Unfaithful, available for $4.99. The retailer also was selling boxed TV DVD sets for $14.99, including various seasons of “Dark Angel,” “M*A*S*H” and “NYPD Blue.”
And Target on the front page of its Fourth of July holiday circular was advertising Pirates of the Caribbean: The Curse of the Black Pearl and Charlie and the Chocolate Factory, plus “selected others,” for $10 each.
Studio executives have long cited price erosion as one of their biggest challenges. Last year, for example, DVD spending rose just 5%, while unit sales jumped 10%.
Price erosion isn't just hitting the bottom line. It may also cause indirect harm to the business by devaluing DVDs in consumers' minds. Already, 20th Century Fox research shows DVD sales are becoming increasingly soft in the second week. Fox's worldwide home entertainment president Mike Dunn interprets this to mean the rabid DVD fans are still buying hot new releases the week they come out, but the next layer of consumer is holding off “until the title either gets repriced or goes on deal again.”