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Product Flow Slow in Early 2007

15 Mar, 2007 By: Thomas K. Arnold

Video industry executives concede that any slowdown in DVD sales so far this year is of their own making — release schedules have been notoriously weak, with a lot of the high-profile theatrical product that traditionally gets saved for January or February pushed out the door in December to capitalize on the fourth-quarter buying frenzy.

The collective box office value of theatrical DVDs released in January was just $533.5 million, down 28.1% from the January 2006 total of $741.6 million. The February 2007 count was $542.8 million, 8% less than the $588 million theatrical value of February 2006 DVD releases.

“Conversion rates are so strong that whatever could be released in November and December, was,” one observer said. “So if you squeeze the windows to get it into December, that sort of makes for an empty January and February.”

And yet there were success stories early in the year. Lionsgate had its biggest January ever and dominated the DVD sales charts in the first two months of this year with hits such as Saw III and Crank.

“Excess product in the holiday period created an opportunity for us in the first quarter,” said president Steve Beeks. “We capitalized on this opportunity by releasing many of our higher-profile titles in January.”

Paramount Home Entertainment, too, has had a good first quarter, thanks to titles such as Flags of Our Fathers, Babel and Flushed Away.

“We've managed to build off of the excitement surrounding the awards season and a less-crowded marketplace to generate strong numbers,” said division president Kelley Avery.

Starz Home Entertainment's year-over-year numbers are actually up from last year, notes EVP and GM Bill Clark, largely due to a strategic expansion of distribution outlets. “There is a lot of opportunity in targeting product to specific consumer segments,” he said. “We've expanded into nontraditional retailers, with product specifically geared to consumers who shop at those destinations.”

But if theatrical tentpoles drive the business, much of the first quarter has chugged along in first gear. Only now, in March, is the industry beginning to see a turnaround, with 17 films coming to DVD after earning $1.03 billion in theaters, essentially flat with the March 2006 theatrical tally. Four of them grossed more than $100 million: Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan ($128.5 million), which came out March 6; Casino Royale ($167 million), released last Tuesday; The Pursuit of Happyness ($162.6 million), due March 27; and Happy Feet ($194.8 million), also coming March 27.

“We had a terrific fourth quarter for both home video and theatrical, and the theatrical product released at year end is now starting to come out on DVD,” said Steve Feldstein, SVP of marketing communications for 20th Century Fox Home Entertainment. “So while there may have been a dearth of major new releases in January and February, that certainly isn't the case now.”

The outlook for April and May also is good, with the box office value of announced April 2007 DVD releases clocking in at $603.3 million, to $671.3 million for the final April 2006 roster. And already, several big titles have been slotted for May, including Dreamgirls (May 1) and Apocalypto (May 22).

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