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Redbox, Netflix growth make up for Blockbuster woes in 2009

January 5, 2010 |  3:33 pm

The good news: DVD rentals were up last year. The bad news: If you own a store that rents DVDs, you have nothing to celebrate. 

According to new data from Rentrak Corp., total DVD and high-definition Blu-ray disc rental revenue in 2009 rose 4% to $6.5 billion.

The gains in DVD rentals, unfortunately for Blockbuster and other stores, came primarily from Redbox and Netflix Inc. There was a 94% surge in revenue from $1-per-night DVD kiosks and 25% growth among online subscription services, more than enough to boost the overall DVD rental businessdespite a precipitous drop at physical rental stores.

Rentals of Blu-ray discs online and at stores jumped 48% to $428.6 million last year, while standard DVD rentals fell 6% to $5.1 billion.

Kiosk revenue was $904 million, driven primarily by market leader Redbox, which reported 90% growth in revenue during the third quarter of 2009. Competitor NCR Corp., which operates kiosks for Blockbuster Inc., is gaining ground, however. It recently bought the No. 3 kiosk operator, DVDPlay.

There was more bad news than good for Hollywood, last year. Rentrak said that DVD and Blu-ray sales plunged 13.7%, or about $1.8 billion, to $12.2 billion. That's six times as big as the $300-million increase in DVD rental revenue. Studios generate a much bigger profit from DVD sales than rentals, particularly low margin $1 per night kiosks and online subscription services.

Probably being mindful of its retail partners, Rentrak declined to say how much rental revenue declined at physical rental stores except that it was "double digit." Blockbuster, the nation's largest physical DVD renter, reported a 21% drop in revenue in the third quarter.

Rentrak also wouldn't provide the total value of online DVD rentals, a market dominated by Netflix. It does not compile data for digital distribution of movies, a fast-growing but still small segment of the home entertainment business.

The Digital Entertainment Group, an industry trade group that represents the major studios and others in the DVD business, will release its own year-end sales data, including from digital outlets, on Thursday at the Consumer Electronics Show.

-- Ben Fritz

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