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DEG: Digital Sellthrough Up 43%, But Disc Sales Drop in Q1

29 Apr, 2014 By: Thomas K. Arnold

The home entertainment industry has good news and bad news to share with the latest quarterly release of consumer spending totals from DEG: The Digital Entertainment Group.

The good news: The first quarter of 2014 was marked by strong growth in digital revenue, with consumer spending on electronic sellthrough (EST) up 43% from the first quarter of 2013, thanks in large part to the growing tendency among studios to sell movies electronically two to three weeks before they come available on disc.

The bad news: The total amount of money generated from digital movie sales during the first three months of 2014, $330.25 million, remains small compared with the billions of dollars studios have realized each year from the sale of DVDs and Blu-ray Discs.

And on that front, discs sales — which for the past several years appeared to be stabilizing — were off 13.7%, to $1.82 billion from $2.1 billion in the first quarter of 2013.

Still, it should be noted that this year’s first quarter did not include the Easter holiday, the second-busiest shopping period of the year, which the DEG says typically provides a packaged-media sales bump in the neighborhood of 25%. Iindeed, according to numbers compiled by Home Media Research, the 2014 second quarter after three weeks, which includes Easter, is up in disc revenue 34% over the same period from the previous year .

When all distribution channels are factored in, total consumer spending on home entertainment during the first quarter of 2014, according to DEG, was $4.53 billion, down 3.8% from the $4.71 billion consumers spent in the first quarter of 2013. By comparison, the box office value of titles that came to video during that period was off 3.5%.

Total consumer purchases on movies, TV shows and other filmed content, factoring in EST as well as DVDs and Blu-ray Discs, amounted to $2.15 billion, 7.6% less than the $2.33 billion generated by content sales in the first quarter of 2013.

Hefty gains also were realized in subscription streaming — think Netflix — with consumers shelling out an estimated $928.6 million, up 26.5% from $734 million in the first quarter of 2013.

Meanwhile, all forms of rental were down. Consumers in the first quarter of this year spent just $175.5 million on renting discs at traditional brick-and-mortar stores — a segment of trade that since the demise of Blockbuster once again consists mostly of independent stores and chains such as Family Video. That’s down 33% from the first quarter of 2013. Rental at kiosks, a market segment dominated by Redbox vending machines, generated an estimated $469.5 million, down 5.5%. And disc subscription rentals, mostly from Netflix, fell nearly 17% to an estimated $224.6 million.

The DEG also said sales of theatrical new releases to home entertainment jumped 83% in the first quarter compared with the same period last year, while the number of Blu-ray Disc households continues to grow, with 4.2 million additional players sold in the first three months of 2014 — a figure that includes BD set-top players as well as PS3/PS4s, Xbox Ones and home theater systems. Total household penetration of all Blu-ray compatible devices now stands at nearly 75 million U.S. homes, DEG reported.

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