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Behind the DEG Numbers

20 Oct, 2009 By: Thomas K. Arnold

It was interesting to see the various news stories based on home entertainment spending numbers released yesterday by DEG: The Digital Entertainment Group. Most news outlets, including ours, really played up the rosy Blu-ray Disc numbers (to see our story, click here). Others, in particular the Los Angeles Times, chose to feed their own perception that packaged media is dying by focusing on the continued slump in DVD sales, which even with the mitigating factor of Blu-ray Disc are now down 13.9% for the year, slightly worse than the 13.5% deficit reported at the year's halfway point. Still other media outlets took the middle ground by noting that total consumer spending on packaged as well as digitally delivered media was down 3.2%, a modest drop given the troubled economy but still nothing to cheer about it.

Not one focused on what, in retrospect, is the real story: Consumer transactions, meaning purchases as well as rentals, rose a healthy 6.6%. That's a resounding vote of confidence in the core premise of our business, which, after all, is simply the act of bringing movies and other pre-recorded programming into the home (or the car, or the laptop) for at-will consumption. The transactions number does not distinguish between a purchase and a rental; both, it can be argued, involve a conscious decision by a consumer to go out and spend money on bringing a DVD or a Blu-ray Disc into the home. Now, studios don't like rental because they don't get as big a piece of the pie as they do from a sale. Heck, sometimes they barely get crumbs, if that.

But looking at things solely from a consumer interest angle, rentals are the same as purchases, and the fact that transactions are up 6.6% is a healthy indicator that consumers most certainly have not lost interest in home video. They're simply going back to their old ways--renting rather than buying--and they're doing so in record numbers.

What the studios need to do now is figure out a way to monetize that 6.6% gain so it doesn't continue to wind up as a 13.9% loss.

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