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Record First Quarter in Sales and Rentals Bodes Well for 2003

24 Apr, 2003 By: Judith M., Melinda S.

As consumers snap up DVD, suppliers and retailers are reaping the benefit thanks to the increase in unit sales, the higher average cost at retail of the format compared to VHS and resurgence of interest at the rental counter.

Consumer spending in the first quarter of 2003 registered $5.83 billion for home video, up 6.8 percent from last year. Sellthrough spending accounted for 56 percent of the mix, setting the stage for another record-breaking year of home entertainment purchases. Rental spending registered a first-quarter high, posting a 2.5 percent uptick for the 13-week period.

Blockbuster dominated the rental market and was the biggest overall revenue generator of the quarter, thanks to its recent foray into sellthrough product. Wal-Mart was the big winner at retail.

Meanwhile, on the supply side, Warner Home Video reigned in overall market share. The studio, which includes HBO and New Line product, garnered 18.9 percent of all rental and sales transactions in the first 13 weeks of the year. Universal Studios Home Video, which includes DreamWorks Entertainment, came in second, earning 18.1 percent of quarterly transactions.

Sellthrough Jumps 10.3 Percent
Video sales registered a whopping $3.29 billion, up 10.3 percent from the first quarter in 2002. According to Video Store Magazine estimates, first-quarter revenue was heavily skewed to DVD, with almost 85 percent (84.4 percent) of the sellthrough tally coming from discs. By comparison, in the same 13-week period last year, DVD revenue accounted for just under three-quarters (74 .4 percent) of the total take.

Combined VHS and DVD units sold through to the marketplace were up 11.8 percent for the quarter. DVD unit sales registered a 42 percent increase in the first three months of 2003, which more than offset the 35 percent decline in the number of cassettes that consumers purchased.

Even as combined unit sales increased and the balance shifted to the higher-priced DVD, decline in average product price offset some of the gains. According to Nielsen data, the average price that a consumer paid for a disc in the first three months of 2003 was $17.34, an 8.7 percent decline from the comparable period last year. Cassette prices also dropped. Consumers on average paid $11.30, compared to $11.93 last year, a drop of 5.3 percent.

On the retail side, the big five (Wal-Mart, Target Stores, Best Buy, Costco and Sam's) scooped up an estimated $1.86 billion, or 56.8 percent, of all consumer home video purchases. Wal-Mart and its affiliate Sam's alone accounted for an estimated $1.06 billion, or 32 percent of the market share.

On the supplier side, Warner Home Video accounted for an estimated $632.9 million or about one-fifth (19.3 percent) of what consumers spent on sellthrough product. High product volume and the hands-down first- quarter sales winner, My Big Fat Greek Wedding, supported the supplier's win.

Disney's aggressive push into DVD in the past 12-month period paid off with a second place finish (18.7 percent) for the quarter, thanks to the increase in popularity of DVD in the family genre, one of the mainstays of the Buena Vista product portfolio. Video Store Magazine estimates that the supplier has moved its product share to 71 percent DVD, compared to 47 percent in the same quarter last year.

Strong Slate Drives Rental Growth
Consumer spending at the rental counter reached record levels in the first quarter of 2003. Consumers spent $2.55 billion in the first 13 weeks of the year, up 2.5 percent from the comparable period in 2002 and up 20.7 percent from the five-year average of $2.1 billion.

Driving demand was a strong product slate throughout the quarter, an increase in disc rentals boosted by holiday player sales and a barrage of winter storms that plagued the country midquarter.

DVD player sales pushed demand for discs at the rental counter to overtake VHS demand. Disc rentals accounted for 51 percent of all rentals in the first quarter of the year,up from 24 percent in 2002. Consumers spent $1.3 billion renting discs in the first 13 weeks of the year,up 120 percent from the comparable period in 2002.

As disc rentals rose, it was at the expense of VHS. Cassette rentals accounted for 49 percent of all rentals in the first quarter, down from 76 percent at the end of March 2002. Consumers spent $1.25 billion on cassette rentals in the first three months of the year, down 34.1 percent from the comparable period last year.

Blockbuster reported first-quarter worldwide revenue up 14.5 percent, highlighted by a 74.4 percent increase in disc sales. Video Store Magazine market research estimates that domestic consumers spent $969 million renting discs and cassettes at Big Blue in the first quarter of 2003. Video Store Magazine market research also estimates that Hollywood Entertainment Corp. turned in a strong 13-week performance, generating an estimated $331 million on rentals for the period.

Universal Studios Home Video took top honors in the rental market share sweepstakes, earning 23.6 percent of all rental transactions in the first three months of the year. Columbia TriStar Home Entertainment showed with a 19.1 percent market share. Warner Home Video rounded out the top three, earning 18.4 percent of quarterly rentals.

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