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Box Office and Home Video: No More Ties That Bind?

19 Jan, 2010 By: Thomas K. Arnold

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I remember in early 1997, when DVD was not yet birthed and the home entertainment industry revolved  around videocassette rentals. Rental revenues had flattened and concerned studios began talking about the "maturing" of the business, wondering whether the novelty of renting a movie had worn off and, if so, we were all doomed. The savvy number-crunchers at Warner Home Video appeared unruffled and put together a road show maintaining that the malaise in the rental business had everything to do with a poor box office the previous year. The message: Box office was down, so of course six months later, when these theatrical duds come to video, the video business will be down. Conversely, give us a good box office and six months down the pike video revenues will soar.

This scenario played out for the remaining years of the rental era and then seemed to carry over into the DVD sellthrough years as well, although for awhile there DVD sales were posting double-digit gains each year regardless of what was happening on the big screen. Then came 2005, the pivotal year when DVD sales growth began to slow, and home entertainment executives again looked at the box office as a harbinger of what was to come. Consumers were becoming increasingly picky, no longer rushing out and buying everything simply because they could. Movies that did well at the box office would sell well when they hit DVD three or four months down the road, and analysts, both within the studios and on the outside, again began looking at the collective theatrical clout of any given month's DVD releases to predict sales.

This past year, however, the ties that bind seem to have become untethered. Box office receipts hit record heights in 2009, and yet DVD sales for the year were off an alarming 14%. The correlation, a growing chorus of industry voices concluded, no longer holds true. Consumers are so "done" with DVD that not even a string of hit movies can get them interested again.

Not so fast. If you really analyze what's happening in the marketplace, you'll find that box office continues to be a quite accurate indicator of home video consumption, if not sales. True, DVD sales fell in a year when box office revenues rose, but factor in rental, Blu-ray Disc and digital delivery and the number of transactions--the number of times consumers brought a movie into their homes — also rose, according to a report released earlier this month by DEG: The Digital Entertainment Group.

In a way, that's reassuring — that even in our business, as packaged and commoditized as it has become, a lot still depends on the quality (defined as commercial success) of the movies. And when you've got films such as Avatar, District 9 and Paranormal Activity, each delighting critics as well as movie-goers (albeit in different ways, and for different reasons), you can't be too down on our little corner of the entertainment kingdom.

As long as there are movies people want to see, there will be people wanting to bring those movies home. And isn't that what we're all about?

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