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DEG Numbers Are Good News for Home Entertainment

10 Jan, 2012 By: Thomas K. Arnold

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Consumer home entertainment spending numbers, released Jan. 9 by DEG: The Digital Entertainment Group, should have Hollywood studio executives jumping for joy.

Sure, total consumer spending on home entertainment for 2011 was down about 2% from the previous year, with a surprisingly strong third quarter followed by a disappointing fourth quarter.

And, yes, spending on packaged media — still Hollywood's bread-and-butter — once again declined in the double digits, albeit not as dramatically as in the last two or three years.

But let's take a big-picture view of what happened. For starters, a 2% drop is virtually inconsequential, given the explosion of the app market in 2011 and all those eyeballs caught up in the novelty of playing Zombie Highway or Tiny Towers on their iPhones and iPads.

What's more, the box office value of movies that came to home entertainment in 2011 was off 8.7%, and that's traditionally been a spot-on indicator of how the home entertainment sector will fare.

As for the decline in packaged-media sales, I wish to make two points: First of all, did any of you happen to wander into a Walmart, Target or Best Buy during the holidays? Recent Blu-ray releases were selling for less than $10, while DVDs could be bought for as little as $3. Heck, I'm surprised consumer spending isn't down a lot more, given the record deep-discounting we saw in the last three months of 2011.

Each year we talk about the "race to the bottom," but based on what I saw on my own excursions to retail land in the weeks leading up to Christmas I fear next year we might find retailers giving consumers free discs just for walking through their doors.

Secondly, consumers are firmly in a state of transition. The movie collecting habit, fueled by the novelty of DVD a decade ago, is definitely waning — a product, I believe, of consumers opening their cupboards and seeing stacks of movies still in their original shrinkwrap. DVD triggered a feeding frenzy, and today, consumers, older and wiser, have simply come to realize they don't need to buy every movie that comes out just because they can.

That's why the biggest gains in 2011 were on the rental side, both physical (kiosks) and digital (VOD). Those gains, in fact, prevented the year from being a disaster, faithfully offsetting declines in sellthrough.

So, in a nutshell, consumers are by no means turning their back on bringing movies into the home. In fact, in terms of sheer transactions, I have a hunch the numbers are up, way up, despite apps, iPads and all the other distractions.

It's just the delivery method that's changing, with consumers opting to watch movies instead of also choosing to own them.

The mainstream media, no doubt, will again zero in on the drop in disc sales and proclaim the home entertainment industry to be at death's door. It's what they do.

But we know better. And if you happen to run into any skeptics, pass this column along to them. A little education never hurt.

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