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Pre-Viewed DVD Sales Will Easily Crest $1B in 2004

15 Apr, 2004 By: Melinda Saccone

Rental dealers are finding salvation in sellthrough.

The rental business may be floundering, but selling previously viewed titles (PVT) is providing rental dealers with a significant and incremental revenue stream.

Sales from PVT DVDs continue to soar, posting triple-digit increases year over year, thanks to early availability of competitively priced product.

In 2003, PVT disc sales provided rental dealers with an additional $859.4 million in revenue, surpassing PVT cassette sales for the first time and generating more revenue than PVT cassettes ever did.

By comparison, PVT disc sales generated $377.1 million in 2002 and $197.8 million in 2001, according to Video Store Magazine Market Research estimates.

Video Store Magazine Market Research projections show that by the end of 2004, PVT disc sales should easily top the $1 billion mark, giving video rentailers even more to smile about.

Selling previously viewed tapes is not a new concept for rentailers. However, unlike VHS, the popularity and success of DVD has spawned a burgeoning aftermarket for discs, where consumers are already primed to purchase.

The sellthrough nature of DVD means cheap buy-ins on the front end and healthy gains on the back end, making them a cash cow for many rentailers.

Since cassettes were primarily priced for rental and many retailers were under revenue-sharing restrictions to sell PVT product, VHS became more of a salvage product than a top market item. That is not the case with DVD. The growing popularity of the almighty disc has eroded demand for previously viewed cassettes. In the past five years, sales of PVT VHS have declined 43 percent as consumers transitioned from cassette to disc.

Meanwhile, PVT DVD sales continue to grow alongside disc rentals and sales despite a marked decline in the average price of a previously viewed disc.

Previously viewed disc sales continue to post triple-digit gains, even though the average price of PVT DVD has dropped by nearly 30 percent in the past five years. The average price of a previously viewed disc commanded $10.64 in 2003, according to Video Store Magazine Market Research.

The price erosion was more than offset by increased demand for PVT DVD. Last year, previously viewed disc sales doubled in Top 100 stores, accounting for an average of 6 percent of their gross revenue. By comparison, in 2002 PVT DVD sales accounted for just 3 percent of gross revenue and 1.7 percent in 2001.

This phenomenon is not lost on the big rental chains. The top three public chains have become master PVT retailers.

Video Store Magazine Market Research estimates that Blockbuster Video generated in excess of $200 million in domestic sales of previously viewed discs alone, giving them nearly one-fourth of the PVT DVD market.

Hollywood Entertainment grabbed a little less than 10 percent of PVT DVD sales in 2003, while Movie Gallery came in with a little more than 5 percent of the nearly $1 billion consumers spent purchasing previously viewed discs last year.

Meanwhile, at the end of 2003, Buena Vista Home Entertainment's Chicago, which was released on DVD Aug.19, generated an estimated $21.7 million in previously viewed disc revenue. The multiple-Oscar winner was the top-selling previously viewed disc of the year. New Line Home Entertainment's The Lord of the Rings: The Two Towers came in a very close second, despite being released one week later. At the end of 2003, The Two Towers had generated $21.5 million in PVT DVD sales.

Both releases shipped more than 1 million DVDs into the rental pipeline, according to Video Store Magazine Market Research estimates, which left plenty of opportunity for previously viewed disc sales once initial demand at the rental counter was satisfied.

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