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Report: DVD Couldn't Save Hollywood in 2006

14 Nov, 2007 By: Erik Gruenwedel

Sluggish DVD sales couldn't help major studios overcome spiraling theatrical costs as the industry took a $1.9 billion loss on new releases in 2006, compared to $2.2 billion in profit in 2004, according to a new report.

The study by Global Media Intelligence, a new unit of London-based research firm Screen Digest, found that DVD sales accounted for 75% of studio revenue growth and profits from 1999 through 2004.

DVD sales in the first half of 2007, however, slumped 12.5% in the United States compared to last year — results mirrored internationally, according to the report.

A projected slight increase in box office revenue this year is not expected to outpace escalating fees paid to top actors, directors and producers, who collectively earned $3 billion in 2006 — almost double from five years ago.

The report found that while revenue from revamped technologies such as video-on-demand is expected to account for 60% of future consumer on-demand spending, it would not deliver at the “lofty levels” previously predicted.

“New technology will not deliver anything like the revenue initially predicted,” said Roger Smith, analyst and author of the report. “As DVD sales continue to decline and the cost of making movies increases, the message is simple: Hollywood studios must reign in costs … if they are to survive.”

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