Digital Growth in Q3 Raises Home Entertainment Over Last Year

1 Nov, 2013 By: Thomas K. Arnold

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Consumer spending on home entertainment in the first nine months of this year was up 1.4% from the same period last year, a tiny increase but one that nevertheless reflects the continued stabilization of a business that until last year had been in a state of decline.

Consumers spent an estimated $12.61 billion on home entertainment purchases and rentals, physical as well as digital, between Jan. 1 and Sept. 30, according to numbers released Nov. 1 by DEG: The Digital Entertainment Group. That’s up from $12.43 billion in the first nine months of 2012.

For the third quarter, consumer spending topped out at $3.97 billion, virtually flat with the third quarter of last year, up just 0.05%.

It should be noted, however, that the box office value of titles released to the home entertainment market in the third quarter of this year was down 6.4% from the prior year’s third quarter, according to DEG, so the fact that consumer spending was flat actually indicates resiliency in the business.

Disc sales were off 7.35% for the year through Sept. 30 and 13.4% for the quarter, with Blu-ray Disc sales slowing down in the third quarter but still posting a 7% increase for the first nine months of the year. Total spending on Blu-ray Discs and DVDs came in at $5 billion for the year through Sept. 30, down from $5.4 billion for the comparable period in 2012, while in the third quarter sales dropped to $1.45 billion from $1.67 billion in the third quarter of 2012.

Dramatic gains in electronic sellthrough (EST), however, significantly closed the gap. When factoring in EST, which rose 48.9% in the first nine months of the year and 46.4% in the third quarter, consumer purchase spending is only off 2.47% for the year, at $5.77 billion, and 7.38% for the third quarter, at $1.72 billion.

On the rental front, consumer spending on physical disc rentals was down on all fronts. The biggest loser was subscription rental of discs, reflecting Netflix’s dramatic shift toward streaming and a policy by three of the six major studios to withhold new releases from Netflix by 28 days. Subscription disc rental was off 19.8% in the first nine months of the year, to an estimated $780.7 million, and 17.3% in the third quarter, to $249.3 million.

Brick-and-mortar rental spending also was off significantly, slipping 14.5% in the quarter to an estimated $244.6 million, and 13.2% in the first nine months of the year, to $766.8 million.

Digital delivery posted the biggest gains, with a 24% uptick for both the year to date and the third quarter, DEG research shows. Consumer spending on all forms of digital entertainment, including EST, VOD and subscription streaming, came in at $4.63 billion for the first nine months of this year, up from $3.73 billion in the comparable period last year, and $1.56 billion in the third quarter, up from $1.25 billion in the third quarter of last year.

DEG research also shows the number of Blu-ray Disc homes continued to rise in the third quarter, with the additional sale of 1.6 million players bringing the total number of BD-equipped households in the United States to 62.3 million.

HDTV penetration, meanwhile, rose to 102 million households, thanks to the third-quarter sale of more than 7.2 million units.
 

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