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Study: TV DVD About to Take a Downturn

23 Jan, 2006 By: Thomas K. Arnold

Has the TV DVD business peaked? A new report from Kagan Research indicates the boom may be over.

Kagan estimates TV DVD will generate a record $2.71 billion in worldwide revenue in 2006 before leveling off as consumers switch to electronic downloads.

Kagan predicts worldwide consumer spending on TV DVD will slip slightly to $2.67 billion in 2008, $2.66 billion in 2010 and $2.62 billion in 2012. By then, TV DVD will account only for an estimated 4.9 percent of the total home entertainment pie, down from a projected 6.7 percent this year. Kagan's numbers are lower than other estimates. Home Media Research pegs domestic consumer spending on TV DVD last year at $3.3 billion, while studio sources say the total could be as high as $4 billion, a quarter of the entire DVD business.

Whatever the total, however, Kagan predicts an imminent end to the “sharp run-up” TV DVD has been having since 2000, when worldwide consumer spending was a meager $570 million.

Bridget McCullough, an associate analyst with Kagan Research, said in an article on the Kagan Web site that the TV DVD category is leveling off primarily because consumers are switching from fixed media to on-demand electronic downloads.

“They are becoming more and more comfortable with the concept of storing their video entertainment on a hard drive as opposed to on a shelf,” she said.

The dam broke last October, when it was announced that the first wave of downloadable programming for Apple's new video iPod would include episodes of red-hot series “Lost” and “Desperate Housewives” for $1.99 each.

Since then, dozens of other top-rated TV shows have become available for download through various other on-demand services offered by such well-known names as Google and DirecTV.

Fueling this migration away from TV DVD is the fact that most of the well-known classic TV series already have been released, “so bursts of sales from mining the vault are petering out,” the Kagan report maintains.

The migration from packaged media to electronic downloads means less money for distributors, Kagan states. While the average take from TV DVD is 80 percent, distributors only get about 60 percent to 70 percent from downloads.

Gord Lacey, editor of Web site TVShowsonDVD.com, thinks the effect of downloads is greatly overblown.

“What will downloads do to TV DVD? Nothing at all,” Lacey said. “What have e-books done to the publishing industry? If you ask me, the downloads are a jump back. Here we are talking about going to HD DVD and Blu-ray, and people are wondering if something half or quarter the resolution is going to threaten the industry?

“If you compare the number of homes with DVD players to the number of homes with video-capable iPods, we're talking about a fraction.”

He noted Home Media Research shows 50 percent of TV DVD consumers buy DVDs just to have them.

“I think [downloads are] great for people who missed an episode,” he said.

Additional reporting by Brendan Howard.

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