2005 Spending Up 2.5 Percent

12 Jan, 2006 By: Judith McCourt

Home Media Retailing's market research department estimates that consumers spent $24.29 billion on video purchases and rentals in 2005, up 2.5 percent from the $23.7 billion spent in the comparable 52-week period in 2004.

The estimates differ slightly from the numbers released last week by DEG: The Digital Entertainment Group. The DEG also pegged consumer spending in 2005 at $24.3 billion, relatively flat with the $24.5 billion the industry association says consumers spent on the home entertainment category in 2004.

Home Media Research estimates DVD revenue accounted for 92 percent of total home video spending for the year.

According to Nielsen VideoScan data, adjusted for a 52-week period, overall unit sales were up a scant 0.3 percent. DVD unit sales were up 5.1 percent, but were barely enough to offset a drastic decline in videocassette unit sales, which fell 61 percent.

Consumer purchases came in at $16.71 billion, up 4.5 percent from 2004, and accounted for 69 percent of all home entertainment dollars spent. Sellthrough revenue came almost exclusively from DVD ($16.32 billion, or 97 percent of the total).

To counter a weak box office and a decline in theatrical catalog releases, suppliers relied increasingly on the lucrative TV DVD category. According to VideoScan data, TV DVD unit shipments were up 15 percent for the year and accounted for 17 percent of all DVD units sold through to consumers.

More than half of the TV DVD titles released in 2005 were multidisc sets, which commanded a hefty suggested list price $45.54, compared to $27.28 for an average new DVD release.

Mass merchants, discounters and Internet merchants dominated the sellthrough market, accounting for 71 percent of unit sales, about the same as they did the year before.

Grocers posted a solid 12.9 percent growth in unit sales, as more and more supermarkets began selling DVDs. Video specialists were the losers for the year, with a 6.6 percent decline in unit sales volume, according to VideoScan data.

Rental revenue continued to slide, with consumer spending for the year pegged at $7.58 billion, down 1.7 percent from 2004. That's the lowest level since 1995, when rental spending came in at an estimated $7.35 billion. By year's end, 90 percent of all rental transactions came from DVD.