DEG: Home Entertainment Spending Up Slightly in First Half of 2015, While Digital Outpaced Physical in Q2

31 Jul, 2015 By: Thomas K. Arnold

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Consumer spending on home entertainment remained stable in the first six months of this year, according to the mid-year 2015 home entertainment report released July 31 by DEG: The Digital Entertainment Group.

DEG pegged total consumer spending on home entertainment in the first half of 2015 at $8.76 billion, up slightly from $8.72 billion in the first half of 2014, a 0.4% rise driven by double-digit growth in key digital categories, including buying movies and TV shows over the Internet and watching Netflix.

Indeed, streaming filmed content — a market segment in which Netflix is king — continued its upward trajectory, with spending on subscription streaming up 25% in the first half of 2015, to $2.38 billion, up from $1.91 billion in the first half of 2014.

That puts subscription streaming in close second to the purchase of Blu-ray Discs and DVDs, a category in which consumer spending fell $14.2% in the first half of 2015 to $2.8 billion, from $3.26 billion in the first six months of 2014.

Electronic sellthrough (EST), meanwhile, rose a healthy 21% to $940.8 million, up from $778 million in the first half of 2014.

Notably, according to the DEG data, the second quarter in particular marked the first time consumers spent more on digital delivery options than physical media — $2.1 billion for digital vs. $2 billion for packaged media. For the first half as a whole, however, physical media still held more than 50% of the market, $4.4 billion compared with $4.3 billion for digital.

Studios are aggressively pushing EST, also known as Digital HD, because of higher margins and the freedom from costs of manufacturing, shipping and returns of packaged media. Common incentives are early release windows and aggressive pricing.

Packaged media, though, is expected to stage a comeback as the industry readies for Ultra HD, which offers an even clearer, brighter picture than HD. Ultra HD has four times as many pixels as HD, for a quality of picture approaching that in movie theaters.

And because of bandwith limitations, streaming won’t be able to handle much Ultra HD content, at least initially, which puts Blu-ray Disc in a prime position to experience a surge in sales, particularly as sales of Ultra HD TVs pick up, industry observers say.

According to the Consumer Electronics Association, sales of Ultra HD displays are projected to reach 4 million units in 2015, up 208% from the prior year. The CEA also says 33% of consumers may purchase an Ultra HD TV over the next three years.

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