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DEG: Home Entertainment Spending Down 4%

21 Oct, 2010 By: Thomas K. Arnold

With the critical fourth quarter well underway, the latest industry statistics show consumer spending on home entertainment to be running about 4% behind last year.

Numbers released today by DEG: The Digital Entertainment Group peg consumer spending through Sept. 30 to be at $12.6 billion.

DVD and Blu-ray Disc purchases, according to DEG estimates based on studio and retail reports, slipped 8% in the first three quarters of the year to $6.5 billion.
Disc rentals, according to Rentrak Corp.’s Home Video Essentials, dropped 4.4% to $4.4 billion.
Only digital distribution posted gains, rising 23% to an estimated $1.7 billion. In the latest quarter, according to DEG, digital distribution accounted for 13.5% of total consumer spending on home entertainment, a higher percentage than in any previous quarter.

Despite the overall spending decline, studio executives point to several encouraging signs for a business that has been hammered by the lingering recession as well as a maturing market for packaged media.

Consumer purchases of Blu-ray Disc software reached $1 billion by Sept. 30, an 80% increase from the first three quarters of 2009. Video-on-demand (VOD) rose 20% to $1.2 billion, while electronic sellthrough — mostly movies sold through Apple iTunes — soared 37% to $432 million.

“While we continue to encounter tough market conditions, there are a number of positive trends emerging, particularly in some of the industry’s key growth areas,” said DEG president Ron Sanders, also president of Warner Home Video. “Blu-ray continues to show strong growth in every category, new release packaged media sellthrough is up, and digital distribution is gaining significant momentum as we move into the fourth quarter.”

Executives are guardedly optimistic about the fourth quarter. Through Sept. 30, consumer purchases of new theatrical releases were up 4% — and the fourth quarter is traditionally the time when most of the big summer movies are released on disc.

And yet the total box office value of movies coming to disc in October, November and December is down from last year. Overall, combined box office earnings for theatrical features coming to disc in the fourth quarter is flat at $4.1 billion, but when accounting for the additional revenue from 3D theatrical showings, the adjusted year-over-year comparison is down 3%.

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