‘Avatar’ helps to slow decline in DVD sales

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The DVD business got some much needed good news in the second quarter, but it may have just been an ‘Avatar’ effect.

According to a new report from the Digital Entertainment Group, an industry consortium that tracks spending on DVD and Blu-ray sales and rentals as well as digital downloads and streaming of movies and television shows, U.S. home entertainment revenue dropped 3.3% in the first half of the year to $8.8 billion.

But most of that drop came during the first quarter. Total home entertainment revenue dropped only .7% in the second three months of 2010 and disc sales fell 3%, the smallest such drops since DVD sales started collapsing in mid-2008 amid the economic downturn and rise of low-cost rental alternatives Redbox and Netflix.

The major studios are undoubtedly hoping it’s a sign that bad news is coming to an end. However, the industry got a special shot in the arm last quarter thanks to the debut of James Cameron’s 3-D blockbuster ‘Avatar,’ which sold 4 million DVDs and 2.7 million Blu-ray discs in just its first four days of release in April, according to 20th Century Fox, the studio behind the movie. That was the biggest DVD launch of the year and biggest Blu-ray launch ever.

Blu-ray high-definition discs remained an overall bright spot. Revenue grew 112% during the second quarter to $363 million. In the first quarter the segment grew 74%.

Digital distribution, the other business that home entertainment executives are counting on to make up for the slow death of DVDs, decelerated slightly during the quarter. While DEG didn’t provide specific figures for the quarter, digital distribution revenue in the first half rose 23% to $1.1 billion, but was up 27% in the first quarter of the year -- implying that second quarter growth was slower.Rental revenue was down 4.9% during the first half to just less than $3 billion, due in large part to the shutdown of Hollywood Video parent company Movie Gallery, as well as store closures by Blockbuster Entertainment. Revenue from $1 per night kiosks run by Redbox and its smaller competitors surged 55% in the first half of 2010.

-- Ben Fritz