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Home entertainment revenue slips 3.9% in first half

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Old 07-16-2009, 11:28 AM   #1  
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Arrow Home entertainment revenue slips 3.9% in first half

PHYSICALEG: Growth in Blu-ray, rental, electronic distribution offset steep DVD drop

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By Marcy Magiera and Susanne Ault -- Video Business, 7/16/2009
JULY 16 | PHYSICAL: Total U.S. home entertainment spending for the first half of 2009 slipped just 3.9%, according to DEG: The Digital Entertainment Group, with a still steep decline in DVD sales being largely offset by growth in Blu-ray Disc sales, packaged media rental and electronic distribution.

DEG sized the entire pie at $9.73 billion for the half, including $3.4 billion in DVD and Blu-ray rentals, which were up 8.3%; $968 million in digital sales and rentals, including cable and satellite video-on-demand, up 21%; and $5.4 billion in DVD and Blu-ray sales, off 13.5%.

Blu-ray sales, which were up 91% to $407 million, offset declines in the studios’ core DVD sales business, which at slightly less than $5 billion for the half, was off in the neighborhood of 17%, according to Video Business calculations. DEG did not break out DVD sales in its announcement.

Studio consensus is that the recession continues to dramatically impact consumer disc spending, pushing people to rent rather than make the relatively more expensive purchase.

Studios and retailers continue to grapple with a home entertainment industry in transition to new formats, including Blu-ray and digital downloads and streaming in the midst of the worst U.S. recession in decades.

New release DVD and Blu-ray sales were down significantly in the first half, estimated Sony Pictures Home Entertainment president David Bishop. At the same time, DVD rental machines are on a giant upswing, with Redbox slated to soar from 14,000 current locations to 22,000 by next year.

“People are trying to save money, and there is strong evidence that consumers are trading down. They are renting instead of buying,” said Bishop. “That is the growth category now in DVD.”

Redbox and other $1 per night kiosks are fueling the growth in the rental market, with consumer spending in the channel up more than 150% in the first quarter, according to Rentrak.

That anticipation of lower revenue from titles has led studios such as Sony to adjust downward their projections on how theatrical films will play on shelves. However, regardless of their economic situation, consumers are devouring adult comedy, action-heavy and cult fan titles.

“We are down somewhere between 15% to 20% from last year, so that becomes your baseline for films going forward,” said Bishop. “R-rated comedy, cult-fan base and action-adventure films seem to be less susceptible. It’s not immune to the downturn, but relative to other categories, it is.”

Sony found this to be the case with May 12 hit release Underworld: Rise of the Lycans, as it sold at a pre-recession rate.

“That really performed at historical levels,” added Bishop. “And it was able to do this with DVD/Blu-ray sales down as much as 20%.”

20th Century Fox Home Entertainment president Mike Dunn said that budget-conscious consumers are grabbing titles at retail more slowly than in years past, but eventually, many of the studio’s titles are hitting their sales targets. March 31 title Marley & Me and May 12 title Taken are expected to each sell 5 million units, exceeding the studios’ expectations for the movies by more than 15%.

Studio execs are encouraged by Blu-ray’s continued momentum, with software sales about double what they were at the half-way mark in 2008. This strength comes even as Blu-ray still carries a price tag premium over standard-definition DVD.

“Last year, about 8% to 10% of our title copies were on Blu-ray, and now that’s up to 10% to 15%,” Lionsgate president/chief operating officer Steve Beeks said. “There is growth in the Blu-ray marketplace.”

Blu-ray’s sales trajectory beats most other products in the general marketplace, note studios. Videogames, which have been retail’s golden child for the last couple of years, have stalled as once red-hot consoles such as the Wii have matured.

“The only other product category with [Blu-ray] growth might be smart phones,” said Dunn.

Rising digital revenue is offering another silver lining to the cloudy economy, as Web-enabled TVs, Blu-ray players and game consoles are offering increasing numbers of ways for consumers to stream and download studio films for playback on television sets. Lionsgate reports that people downloaded its movies 1.5 million times in the first half of the year, generating a 92% jump in revenue over the same frame in 2008.

“There are more devices getting movies to the TV, and we are focused on uploading as many of our 12,000 library titles as we can" for downloading/streaming, said Beeks. “The overall consumer appetite for movies continues to grow.”

Also within emerging technologies, cable/satellite video-on-demand is delivering new revenue streams for studios. Fox reports that Bride Wars generated a healthy $15 million in revenue alone for cable/satellite VOD.

Studios are upbeat that this fourth quarter will represent a dramatic turnaround for the business, taking into account its growth areas such as Blu-ray and digital. A steady stream of summer theatrical blockbusters, including Star Trek, Transformers: Revenge of the Fallen and Harry Potter and the Half-Blood Prince, bodes well for their DVD releases in the last part of 2009.

Dunn believes the October-November frame will show improved consumer spending over the comparable period in 2008.

“The table is set for the future, where the industry has done a nice job in building the infrastructure to re-take the category probably by the fourth quarter,” said Dunn. "The world fell apart for the consumer last year, and they re-aligned their habits. But the table is set for the future.”
http://www.videobusiness.com/article...?desc=topstory
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Old 07-16-2009, 11:56 AM   #2  
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Good article. Its not surprising to see the rentals going up. People are watching their money more than ever now and expensive discs are not a priority for many people.
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Old 07-16-2009, 01:18 PM   #3  
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Default Home Entertainment Holding Up Well, DEG Says

Here's the Home Media Magazine Story (Different Headline)

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By : Thomas K. Arnold | Posted: 16 Jul 2009
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Numbers released by an industry trade group show the home entertainment business is weathering the Great Recession remarkably well, although the troubled economy is prompting more consumers to return to their old habit of renting rather than buying videos.

Consumer spending on DVD, Blu-ray Disc and digitally distributed programming was off 3.9% in the first six months of 2009 from the first half of 2008, according to DEG: The Digital Entertainment Group, coming in at an estimated $9.73 billion.

Consumer spending on DVD and Blu-ray Disc purchases took the hardest hit, slipping 13.5% in the first half, largely due to a weak first quarter in which sales tumbled 15%. The first-half tally was further bolstered by a 91% gain in Blu-ray Disc sales (to $407 million) and a 21% rise in digital distribution spending (to $968 million, which includes $196 million for electronic sellthrough).

Rental spending, on the other hand, was up an impressive 8.3%, again boosted by a significant (62%) gain in Blu-ray Disc spending but also aided by the proliferation of rental kiosks.

“Despite an extraordinarily challenging marketplace, the home entertainment sector continues to be remarkably stable overall, particularly with the growth of higher-margin businesses like Blu-ray Disc and digital distribution,” said Warner Home Video president Ron Sanders, president of the DEG.

He notes that home entertainment’s net operating profit contribution was down just 2.2% in the first half of 2009, because the studios get a bigger cut from Blu-ray Disc and digital distribution sales than they do from standard DVD.

Blu-ray Disc software sales were up 91% at retail in the first six months of this year, according to DEG figures compiled by the DEG with input from suppliers and retailers. Nearly 20 million Blu-ray Discs shipped to retail in the second quarter of the year, according to figures compiled by Swicker & Associates on behalf of the DEG — 57% more than in the same period last year.

Also, Blu-ray Disc hardware sales exceeded 2 million units in the first half of 2009, up nearly 25% from the first half of 2008. The total installed base of Blu-ray playback devices in U.S. homes, including Sony PlayStation 3 video game consoles, is now estimated at nearly 11 million units.

Meanwhile, the number of high-definition households continues to grow, adding to Blu-ray’s potential customer base. According to figures compiled by the DEG and based on data from the Consumer Electronics Association, retailers and manufacturers, more than 10 million HDTVs were sold to consumers in the first half of 2009. That brings the household penetration of HDTVs in the United States to approximately 44 million, up 13% from the end of last year and representing 38% of all U.S. households.

Bob Chapek, president of Walt Disney Studios Home Entertainment and chairman of the DEG, looked at the numbers and sounded an optimistic note.

“The overwhelming satisfaction expressed by consumers with regard to Blu-ray shows great promise to the industry’s economic future and we are also optimistic regarding their appetite toward digital technologies,” Chapek said. “Both formats, converging together and resulting in one cohesive consumer experience, will present an opportunity for the industry to return to growth and eclipse our previous benchmarks.”

Last edited by Kosty; 07-16-2009 at 01:29 PM..
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Old 07-16-2009, 01:43 PM   #4  
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At this moment my Home Media Magazine estimates for Blu-ray and DVD sell through are close to this DEG release and the trends in the Blu-ray growth are comparable, the difference is in the estimate for last years DVD sales in the 1Q 2008 which the DEG has as a bit higher, which is the difference in their estimations of Wal-Mart sales and in the accounting for the difference in the wounding of the first week and the last week of the period . My stats start in to the first week of the 1Q as in 01/06/08 and 01/04/09 and end on even week Sundays of 06/28/09 and 06/29/08 so the reported period is slightly different.
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Old 07-16-2009, 01:57 PM   #5  
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Quote:
Home entertainment revenue slips 3.9% in first half

PHYSICAL: DEG: Growth in Blu-ray, rental, electronic distribution offset steep DVD drop

Home Entertainment Holding Up Well, DEG Says
Out of these three headlines, which one are we focusing on?
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Old 07-16-2009, 02:01 PM   #6  
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The 2009 figures are basically the same with just some slight rounding and reporting period variation. The 2008 difference is for DVD sales as DEG has them higher than HMM does for the 1Q 2008 and thats mostly the Wal-Mart estimation factor and the even week rounding of the quarters.
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Old 07-16-2009, 05:28 PM   #7  
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Quote:
Lionsgate reports that people downloaded its movies 1.5 million times in the first half of the year, generating a 92% jump in revenue over the same frame in 2008.

“There are more devices getting movies to the TV, and we are focused on uploading as many of our 12,000 library titles as we can" for downloading/streaming, said Beeks. “The overall consumer appetite for movies continues to grow.”

Also within emerging technologies, cable/satellite video-on-demand is delivering new revenue streams for studios. Fox reports that Bride Wars generated a healthy $15 million in revenue alone for cable/satellite VOD.
This is what my eyes immediately focused to!
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Old 07-16-2009, 05:58 PM   #8  
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Yea there was happy stuff in there for the streaming folks too.

Works for me. I just want Hollywood and retailer to keep getting enough money so they keep making movies and putting them out for use to buy or rent.
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Old 07-16-2009, 06:24 PM   #9  
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Quote:
Originally Posted by Kosty View Post
Yea there was happy stuff in there for the streaming folks too.

Works for me. I just want Hollywood and retailer to keep getting enough money so they keep making movies and putting them out for use to buy or rent.
Count me as one of those happy streaming folks too, Kosty. $968M for digital distribution is mighty nice and over two times the revenue of BD.
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Old 07-16-2009, 07:10 PM   #10  
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Originally Posted by 85mics View Post
Count me as one of those happy streaming folks too, Kosty. $968M for digital distribution is mighty nice and over two times the revenue of BD.
Look who is back to posting! Is bluray still a "cancer"? You said that before, right? You still (after all this time) sound bitter. Sucks for you. Must suck to hold so much resentment and hard feelings for so long over optical media.

Sad to say that you aren't starting off very well, since, if you had read carefully, you would have seen that out of that $968M, "$196 million [was] for electronic sellthrough". Electronic sellthrough = ownership. Like I own my blurays.

Reread this:
Quote:
DEG sized the entire pie at $9.73 billion for the half, including $3.4 billion in DVD and Blu-ray rentals, which were up 8.3%; $968 million in digital sales and rentals, including cable and satellite video-on-demand, up 21%; and $5.4 billion in DVD and Blu-ray sales, off 13.5%.
and this:
Quote:
The first-half tally was further bolstered by a 91% gain in Blu-ray Disc sales (to $407 million) and a 21% rise in digital distribution spending (to $968 million, which includes $196 million for electronic sellthrough).
$196M is 2 times LESS than bluray revenue. So just like with so many other things, the exact opposite of what you said is true. Must be a first for you.

You are not comparing like purchases. You just saw the bigger number and thought "hey, bigger than bluray". But you were wrong. Please see the difference between rental and ownership, and see the error of your ways.

Last edited by bmore; 07-16-2009 at 07:30 PM..
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Old 07-16-2009, 07:14 PM   #11  
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Quote:
Originally Posted by The_Omega_Man View Post
This is what my eyes immediately focused to!
Quote:
Originally Posted by 85mics View Post
Count me as one of those happy streaming folks too, Kosty. $968M for digital distribution is mighty nice and over two times the revenue of BD.
Hey! Look at the hold out HD DVD owners, getting all excited about subpar quality media when a superior format equal to and above their beloved HD DVD is available! Imagine that! Rallying around anything but bluray! Who would have guessed!

Guess what guys...a lot of bluray players also let you stream media. It's the best of BOTH worlds. Give it a shot, instead of being bitter your whole life that your 5" piece of plastic was the loser.
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Old 07-16-2009, 07:19 PM   #12  
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Originally Posted by 85mics View Post
Count me as one of those happy streaming folks too, Kosty. $968M for digital distribution is mighty nice and over two times the revenue of BD.
You realize that you are comparing combined digital distribution revenue (which includes SD and HD resolution, rental and sell-through and also cable and satellite video-on-demand) to blu-ray sell-through only?

I think that's what Lee would call spin.

Quote:
DEG sized the entire pie at $9.73 billion for the half, including $3.4 billion in DVD and Blu-ray rentals, which were up 8.3%; $968 million in digital sales and rentals, including cable and satellite video-on-demand, up 21%; and $5.4 billion in DVD and Blu-ray sales, off 13.5%.
Let's review shall we? Both SD and HD digital sell-through was $196 million which represents 3.5% of the total sell-through pie ($196 million / $5.596 billion). Blu-ray sell-through was $407 million which represents 7.3% of the total sell-through pie ($407 million / $5.596 billion).

Anyone care to guess how much of that $196 million digital sell-through was actually HD content? How about 10%? So we may be looking at something along the lines of $19.6 million (HD digital) versus $407 million (HD optical/blu-ray)?

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Old 07-16-2009, 07:28 PM   #13  
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Originally Posted by Dave J View Post
You realize that you are comparing combined digital distribution revenue (which includes SD and HD resolution, rental and sell-through and also cable and satellite video-on-demand) to blu-ray sell-through only?

I think that's what Lee would call spin.


Let's review shall we? Both SD and HD digital sell-through was $196 million which represents 3.5% of the total sell-through pie ($196 million / $5.596 billion). Blu-ray sell-through was $407 million which represents 7.3% of the total sell-through pie ($407 million / $5.596 billion).

Anyone care to guess how much of that $196 million digital sell-through was actually HD content? How about 10%? So we may be looking at something along the lines of $19.6 million (HD digital) versus $407 million (HD optical/blu-ray)?


Yeah, I tried to explaining this above.

It's not worth it I don't think. They are blinded by irrational hatred.
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Old 07-16-2009, 08:59 PM   #14  
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Originally Posted by 85mics View Post
Count me as one of those happy streaming folks too, Kosty. $968M for digital distribution is mighty nice and over two times the revenue of BD.
DEG is counting in that all Video on Demand revenues including hotel rooms and cable and sat VOD servcies. Which have been flat for about a decade now.
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Old 07-17-2009, 03:27 AM   #15  
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I think if these MSRP price increases on BD movies start showing up in the street prices the trend will shift even more to just renting movies.

I have not bought a BD movie since 12/2008, and when i looked at a couple of bargain catalog titles at Amazon the price had gone up 25% in less than 36 hours.

Raising prices on buying the movies will just shift more people to rent than we are already seeing. All I have done is rent BDs so far this year myself, and if prices go up I will likely not be buying much if anything for the rest of the year either.

So much for owning 3 BD players if they do this price increase. They will likely collect more dust especially in the kids' playroom where they have a 50" HDTV & BD player.
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