DVD rental revenue falls, delivering another blow to home entertainment business

DVD rentals have gone from silver lining for Hollywood's struggling home entertainment business to yet another rain cloud.

The Digital Entertainment Group, a trade organization for the major movie studios, released its first-quarter data Thursday with the surprising news that U.S. DVD rental revenue fell 14% from a year ago. DVD sales account for about half the profits for a movie, so any decline portends financial worries.

During a very tough 2009 for home entertainment, consumers preferred to rent DVDs than purchase them. DVD rental revenue rose 4% in 2009, while sales dropped 13%. Both figures include high-definition Blu-ray discs.

The DEG did not provide the total amount of rental revenue for the first three months of 2009.

The group attributed the fall in rental revenue to the closure of physical stores as Blockbuster Inc. and Movie Gallery Inc. shut down locations rapidly. Both companies were struggling in 2009, however, when DVD mail subscription service Netflix and kiosk company Redbox accounted for nearly all of the rise in rentals.

The drop in rental revenue last quarter indicates that the two companies' rapid growth in 2009 may be slowing.

DVD and Blu-ray sales revenue, meanwhile, declined 11%, to a little more than $2.5 billion, dashing the hopes of many studios that comparisons with last year, when the recession was in full force, would cause the trend of falling sales to lessen or reverse.

The one major hit that launched on DVD in the first three months of the year was "The Twilight Saga: New Moon," which sold 4 million units the weekend it debuted.

In its release, the DEG noted that the comparison with the first quarter of 2010 was difficult because Circuit City was selling a large number of discs at a low price as part of its liquidation. Overall DVD and Blu-ray sales revenue was off 9% in the first quarter of last year despite that factor, however.

Blu-ray and digital remain bright spots. Sales of the high-definition discs were up 74%, and rentals were up 36%. Digital distribution revenue, which included download-to-own and video-on-demand rentals, grew by 27%, to $617 million.

Neither were nearly enough to make up for the drops in sales and rental, however. Overall consumer home entertainment spending dropped by 8%, to $4.8 billion. If that number doesn't improve over the next nine months, Hollywood could be looking at an even tougher year for home entertainment than 2009, when total revenue fell 5%.

"We are still facing a challenging environment but are very pleased to see positive indicators of stabilization in our overall business," Warner Home Video president Ron Sanders, who heads the DEG, said in a statement.

-- Ben Fritz

Comments

[Ron Larson]

Funny how this article fails to mention OTHER delivery mediums for films. Instead it focuses only on optical disks and makes it sound all doom and gloom in the film biz.

What about online streaming? I personally rent far fewer disks than I used to because I now watch streaming TV and films online. Why do I need to make a trip to rent a DVD when I can just stream it onto my home?

What this article really is is propaganda from the MPAA to try get push ACTA through in order to take away your rights to internet access, and to play your legally purchased music and movies on your equipment the way you want.

The music industry has used the same trick. They claim that drops in CD sales are proof that piracy is rampant and destroying the music industry. The truth is that their customers prefer to download their music form the web instead of buying a disk from a store. The industry is simply spinning statistics to force abusive laws downs our throats.

Please read this article for what it really is, propaganda designed to take away your rights.

[RBBrittain]

I don't see any propaganda here. What I do see is the market undermining Hollywood's illegal price-fixing conspiracy of locking lower-cost Netflix & Redbox out of release-date access to films. With Blockbuster & Movie Gallery both imploding (and presumably mom-and-pops behind them), soon Netflix & Redbox could be the ONLY ways to rent.

[MarkyMark]

What these figures say to me is that home entertainment spending is a discretionary luxury in an economy that is clearly still in recession and going backwards.

For over a year now all the media talk in the US has been about 'green shoots', 'a nascent recovery' and 'coming out of recession' - whereas on mainstreet sales have been going down, down, down (as evidenced by declining state sales and income tax receipts).

Here's the math:

No job + no house equity + no HELOC + rising taxes, gas & health insurance = falling entertainment sales.

[dvd rental by mail]

That is very good post! i agree with Ron Larson

[Matches Malone]

While I agree with Ron Larson to a point, the ups and downs of the movie industry have always been dictated by the quality of the product coming out that particular year, meaning, most likely, the movies that have been going to DVD this last year have simply been sucking wind, and no one cares to buy crap....