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Music DVD a Small But Growing Segment of the Music Biz

31 Mar, 2005 By: Judith McCourt

While CD sales have only posted a slight recovery after three years of decline, sales of music video — a category dominated by music DVD — have more than doubled in the past two years.

Music video may be a small (5 percent) part of the overall music business, but it's growing at a rapid clip, adding more than half a billion dollars to the record labels' coffers in 2004, according to statistics from the Recording Industry Association of America (RIAA).

The total value of all music shipments in 2004 was $12.15 billion, up 2.5 percent from the previous year but still well below the $14.5 billion that music shipments registered in 1999, according to the RIAA. Nielsen SoundScan echoed the good news, reporting that in 2004, overall music purchases exceeded 800 million units for the first time since 2000.

CD album sales accounted for the lion's share of the market, with the RIAA pegging the value of CD shipments in 2004 at nearly $11.5 billion. SoundScan reports a 2.3 percent uptick in CD album sales from 2003.

Compared to these modest growth numbers, the increase in the music video market over the past few years has been staggering. Last year, music DVD shipments were valued at $561.1 million, up from just $80.3 million in 2000.

Music DVD, which now represents 92 percent of the music video market, has surpassed the unit (27.2 million) and value ($508 million) high point that music video on VHS achieved when it peaked in 1998. The waning popularity of music video paralleled the growing adoption of the DVD player. In 1999, when overall music shipments were peaking ($14.58 billion), music video shipments dropped more than 25 percent. This suggests that early DVD and Internet adopters had been buyers of music video and abandoned the format with the emergence of new technologies.

Today, with more than 70 percent DVD playback penetration and a wider range of product availability, music DVD is on the rise. Sales gains are reflected on the output end as well. According to The DVD Release Report, in 2004 more than 1,200 music DVD titles were released, up from just 225 titles in 1999.

Prices for music DVDs have come down, despite complaints by retailers at Home Media Retailing's first-ever Music DVD Conference that they haven't dropped enough. In 1997, the average suggested retail price for a music DVD was $26.04, according to The DVD Release Report. Now, it's $18.17. During the same time frame, the average SRP for a theatrical release remained relatively flat, from $26.09 to $26.19.

Mass merchants are becoming increasingly important retail players in the music DVD business, just as they are for the overall DVD category. According to Nielsen SoundScan, the mass merchants' share of music sales climbed to 38 percent in 2004, a gain of 4 percentage points since 2002. Dedicated music chains and independent music stores, in turn, lost 4 percent and 10 percent of their sales, respectively, during 2004. SoundScan reports that in 2004, 48 percent of album sales occurred in music chain stores and just 9 percent in independent music stores.

In a study by Home Media Research, mass merchants unanimously say they carry music DVD and that in the next year, they plan to carry more than they do now. The study also shows that music DVD can be found in the music section or the DVD section, and that savvy merchandisers are placing it in both sections to draw attention to the product.

Baby Boomers (born 1946-1964) and Echo Boomers (born 1981-1995) have been among the first to embrace Music DVD. According to RIAA's 2003 consumer profile, people over the age of 40 are the biggest purchasers of music (37 percent) while those under the age of 25 are a close second (30 percent).

Nielsen SoundScan's 2004 list of top sellers reflects the tastes and preferences of these generations. Topping the list of DVD music sellers in 2004 was WEA's Jay-Z and Linkin Park's Collision Course. Artists with high baby boomer appeal, which are now resonating with their offspring, include Interscope's release of U2's How to Dismantle the Atomic Bomb (No. 4) and Number Ones from The Bee Gees (No.9).

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