THE TOP 100 Executive Summary: It's All About DVD29 Apr, 2002 By: Judith M., Melinda S.
This week, Hive4Media will bring you Video Store Magazine's Exclusive Annual Research bonanza, the Top 100. Two parts of this unique research series will appear every day this week in this space. Today we begin with this executive summary and the industry's top revenue generators. To view supporting charts and tables, see your copy of Video Store Magazine!
Last year was pivotal for home entertainment, as surging demand for DVD found more and more consumers transitioning from VHS -- particularly in the fourth quarter, when retailers and studios broke sales records with such high-profile DVD releases as The Mummy Returns, Snow White and Shrek.
Overall U.S. sellthrough revenue remained flat at $10.78 billion, but as the year progressed, DVD grabbed an increasingly greater share of the proceeds, thanks in large part to an aggressive stance toward the format by large discount and music chains.
Indeed, Wal-Mart, which got a late start in DVD, ended the year as the top seller of the software, with 2001 sales approaching the $1 billion mark -- more than twice the 2000 sales tally of $375 million. Wal-Mart achieved this growth through a number of strategic ploys, including the placement of DVD discount bins in high-traffic aisles and aggressive stocking of DVD catalog and hits.
Best Buy, an early champion of DVD, slipped to the No. 2 spot, which isn't surprising given that Wal-Mart has more than four times as many stores. Best Buy still managed to finish the year with DVD sales of nearly $750 million, up 48.4 percent from 2000.
Two other mass merchants posted healthy gains in the increasingly competitive DVD sweepstakes. Costco rose to No. 4 from No. 6, with DVD sales in 2001 totaling $388.1 million, a 148.8 percent gain from 2000. And Target Stores came in at No. 5, with $359 million in DVD software sales, up three notches from 2000.
Wal-Mart, Costco, Target and other mass merchants also posted significant gains in overall sellthrough revenue, with Wal-Mart's total video sales nearly doubling over the past two years. DVD is certainly a factor, but so is the fact that the big discount chains continue to move large quantities of cassettes, many of them priced below $10.
While DVD's effect on sellthrough seems to be one of replacement, on the rental side the digital format is reinvigorating the entire category, with the upswing in DVD rental activity more than offsetting a decline in VHS rentals.
For the first time in two years, consumer spending on video rentals was up, with 2001's total of $10.03 billion up a healthy 6 percent from the spending total in 2000. DVD rentals contributed $1.5 billion and are expected to account for an even larger share in the coming year as rental dealers continue to allocate more open-to-buy dollars to the digital format.
Although there were some position changes among key players in the sellthrough arena, the cast of characters on the rental side remained relatively stable. Among the video specialty chains, Blockbuster is still on top, and big public chains -- Hollywood Entertainment and Movie Gallery -- are again No. 2 and No. 4. (The No. 3 spot is occupied by Suncoast Motion Picture Co., a sellthrough-only chain that is part of the Best Buy empire.)
According to Video Store Magazine market research, one-third of all rental spending in 2001 took place at Blockbuster stores, giving the Dallas-based chain a 33 percent market share. Hollywood Entertainment accounted for 10.2 percent of rental revenue, and Movie Gallery generated an estimated 3 percent of the total rental spending pie. Rounding out the top five video specialists is the privately held Family Video chain of Springfield, Ill. As of the end of 2001, Family Video operated 237 stores and posted combined rental and sellthrough video revenue of $144 million, up 18.5 percent from the previous year.
Overall, Blockbuster was once again the top video revenue generator, with $3.6 billion in combined VHS and DVD rentals and sales. Wal-Mart finished a close second, with an estimated $3 billion generated from sales only.
This year, Video Store Magazine has again broken down the Top 100 into 10 categories, each representing a key class of trade in the home video business. In addition, we have continued to compile a list of the top 100 video specialists.
One of the most notable changes that occurred in 2001 was the emergence of brick-and-mortar retailers in the top 10 online video dealers list.
Online units of Best Buy, Costco, Target Stores and Wal-Mart all invaded the list this year, rubbing elbows with the likes of Amazon.com, which despite a challenging year remained at No. 1.
The Top 100 is a year-long project that consists of surveys and interviews with key players, analysts and suppliers.
The process is supported with an extensive review of financial statements, annual reports and other data to generate what we believe is the most accurate retail barometer available in the home video industry.
To read about the Top 10 Video Revenue Generators, click here.
To read about the Top 10 DVD Sellthrough Revenue Generators, click here.