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Lionsgate Says New Delivery Options Beginning to Pay Off

16 Jul, 2007 By: Thomas K. Arnold

Lionsgate sees growth in next-generation high-definition optical discs and digital delivery.

LAS VEGAS — New ways of bringing entertainment into the home, both physical and electronic, could add more than a half-billion dollars to Hollywood's coffers by the end of this year, according to Lionsgate.

Lionsgate VP of strategic research, Michael Youn, projects consumers this year will spend $350 million buying Blu-ray Disc and HD DVD software, and another $88 million renting the next-generation discs. That's up from $34 million and $9 million, respectively, in 2006, the year both high-definition formats launched.

Another $109 million is projected to go to the digital downloading of movies, Youn said, nearly eight times the $14 million consumers spent buying movies over the Internet in 2006, the first year major-studio movies were widely available for downloading.

Consumer spending on video-on-demand is projected to grow to $1.26 billion, from $836 million in 2006.

Factoring in these figures, Youn projects total consumer spending on home entertainment will rise to $26.86 billion in 2007, up from $26.24 billion in 2006. Standard DVD sellthrough and rental, which Lionsgate pegged at $24.26 billion in 2006, is expected to slip to $23.91 billion, while used DVD sales are projected to post slight gains to $1.15 billion, up from $1.09 billion in 2006.

Youn sees further growth ahead for both high-definition packaged media and digital downloading. He projects consumer spending on high-def discs will grow at an annual rate of 190% through 2011, to $6.8 billion, or nearly 50% of total packaged media sellthrough spending, which is expected to decline by a modest 1% a year through 2011.

On the rental end, Youn projects an annual decline of 8% in rental spending at traditional brick-and-mortar retailers over the next five years. But growth in subscription rental will keep the total rental spend decline at less than 1% a year, with consumers projected to spend $8.5 billion renting discs in 2011, down just slightly from the $8.8 billion they spent last year (a figure that includes sales of previously viewed discs).

Digital delivery spending is projected to grow at an annual rate of 175% a year, to just more than $2 billion in 2011. VOD spending in five years is expected to hit $3 billion, an annual growth rate of about 32%.

Growth in digital platforms is expected to increase total home entertainment spending by about 2% a year, Youn said.

Youn presented his research during Lionsgate's annual retail pow-wow at the Red Rocks Hotel and Casino, two days before the start of Home Media Expo 2007, the annual convention and trade show of the Entertainment Merchants Association (previously Video Software Dealers Association).

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