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I Bet VHS Is Tanking Vs. VOD, Too!

13 May, 2011 By: Stephanie Prange

Blu-ray Disc just can’t catch a break. In the most recent salvo against packaged media, SNL Kagan bemoaned the falling fortunes of DVD, maintaining the format’s wholesale revenue to the studios dropped a “shocking 43.9% in 2010” — a figure the studios say is simply not true.

“Consumers are now opting to sign up for streaming and/or rental services, like Netflix Inc.,” according to Kagan. “They are using VOD services more and more, as they discover these services can be cost effective. Unfortunately for studios, the revenue from VOD has not yet offset the resulting drop in DVD sale revenue, which was their top earner for more than a decade.”

Wow. What a revelation! The aging format DVD is waning. I bet they would have found that VHS revenue to studios was falling off versus Netflix and other VOD services with the advent of DVD as well.

The report declined to mention how much of a margin the current-generation disc format Blu-ray contributes. Buried a few graphs down was a mention of Blu-ray: “It is important to note that this does not include Blu-ray revenue, which grew significantly in 2010.”

Blu-ray revenue has not offset the decline in DVD revenue either, but to omit its contribution to the studios’ bottom line and only concentrate on the decline of the previous-generation format’s revenue — and use a number the studios say is seriously out of whack with reality — is disingenuous.

When queried by our reporter, a spokesperson noted that Kagan is preparing a Blu-ray report as well. Let’s hope that report will offer a more well-rounded, and accurate, view of the packaged-media business.

No doubt rental services — including online subscription rentals both physical and digital via Netflix and $1 disc rentals via Redbox and other kiosks — are enjoying growth. But to claim that VOD, and only VOD, is competing with DVD is just plain wrong. Physical rentals as well as next-generation Blu-ray Disc sales also are competing successfully for home entertainment dollars and increasingly are taking the place of DVD sales. Indeed, there is a DVD included in many Blu-ray combo packs that I doubt Kagan noted as a DVD sale.

Comparing any current home entertainment option to the heyday of DVD is just plain silly. Consumers never again will collect catalog that feverishly, having already bought much of what they want to own. In the rush to declare the disc dead, sometimes the facts are muddled.

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