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Video Sellthrough Expected to Top $16 Billion in 2004

14 Oct, 2004 By: Judith M., Melinda S.

The buying frenzy has begun. Video sales will climb to a new high this year, with consumers expected to spend more than $16 billion buying videos in 2004, according to Video Store Magazine Market Research estimates.

Studios jockeying for an ideal release date in a jam-packed schedule have created a longer holiday gift-giving season, with video releases debuting as early as late August.

Thus, sales tallies for the last four months of the year as a percentage of the total annual sales are on the rise. And 2004 is shaping up to follow the same pattern.

In 2002, consumers spent $12.1 billion buying video product, according to VSM Market Research estimates. More than 70 percent of video purchases for the year were in the DVD format. Of the total take for the year, 40 percent of the spending occurred in the last four months of the year.

When 2003 closed, DVD players were in 57 million U.S. households, according to DEG: The Digital Entertainment Group estimates. Consumers spent $14.1 billion buying videos, and 84 percent of the dollars were generated from disc purchases that year. In 2003, 43.4 percent of the year's bounty was rung up between September and December.

The strength of this year's release cycle and consumers' desire to own DVDs supports a strong finish for video sales. Couple this with a DVD penetration — which exceeds 70 percent of U.S. households if you include all DVD playback devices — and this year revenue could settle north of the $16 billion mark, with the potential to reach $16.5 billion.

Video revenue projections issued by Merrill Lynch are equally optimistic. Analyst Jessica Reif Cohen pegs the potential for DVD sales at $16.5 billion, conservatively, by year's end.

Video sales at the end of August stood at $9.04 billion, according to VSM Market Research, with 93 percent being generated from disc sales.

Last year, New Line Home Entertainment's The Lord of the Rings: The Two Towers kicked off holiday 2003 sales Aug. 26. Two Towers, with the reinforcement of its extended and gift-set versions released in November, went on to sell an estimated 17.3 million units by year's end.

This year, 20th Century Fox's The Passion of the Christ was the leadoff hitter, debuting Aug. 31. The rest of the 2004 slate is equally strong. Between September and December, 29 titles with a total box office strength of $4.03 billion will debut on video.

Yet to enter the retail pipeline is DreamWorks Home Entertainment's Shrek 2, which made $436.5 million at the box office. The blockbuster will bow on DVD Nov. 5, taking the comparable spot to last year's top seller, Disney's Finding Nemo, which was released Nov. 4 and went on to sell 25.4 million units in 2003.

Columbia TriStar Home Entertainment will release Spider-Man 2 Nov. 30. The Spider-Man sequel made $372.2 million at the box office, making it the No. 2 top box office grosser so far this year.

December will finish on a strong note. Late December releases include Fox's I, Robot (Dec. 14, $143.8 million) and DreamWorks' Collateral (Dec. 14, $100 million). Also sure to score well with sales will be New Line's The Lord of the Rings: The Return of the King ($377 million) extended edition and collector's gift set (Dec. 14).

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