Home video industry bounds past $20 billion mark

VB RESEARCH: DVD fuels 25% surge in spending to $12.1 bil in '02.

By Scott Hettrick -- Video Business, 1/10/2003

JAN. 10 | The DVD buying binge has pushed the home video industry past the $20 billion mark.

The shiny little disc sparked growth of about 25% in overall consumer spending on the purchase of movies, now estimated at $12.1 billion, according to Video Business research based on studio data. Spending on the purchase of DVDs alone leaped 52.6% to $8.7 billion, more than double the $3.4 billion spent on VHS, which tumbled 17.1% from a year ago.

Meanwhile, consumers spent another $8.2 billion to rent movies on DVD and VHS, putting the U.S. video industry at a monstrous $20.3 billion, up 11.5% from 2001.

Combined with theatrical ticket purchases, consumers doled out more than $30 billion buying, renting and going to see movies in 2002, making it one of the largest business sectors and certainly one of the highest growth areas in an otherwise moribund economy. (The money that went to the purchase of videos is more than 30% greater than the record-setting $9.2 billion spent on movie theater tickets last year.)

DVD also had an astonishing year on the rental side, up 106% to

$2.9 billion. VHS rentals were down about 25% to $5.3 billion. Overall, the rental business slipped 3% with 144 million fewer copies rented, according to VSDA VidTrac.

Warner Home Video dominated the year with its 21.7% share of the sales-and-rental market. The public spent $4.4 billion on Warner titles (which include New Line Home Entertainment and HBO Video releases), up almost 30% from 2001.

Warner was the winner in seven of nine major categories (it was runner-up to Walt Disney Co.'s Buena Vista Home Entertainment in VHS sales and total VHS and DVD sales). Ironically, less than three weeks ago, Warner ousted Warren Lieberfarb, the man who led the studio to these heights, but named his longtime lieutenant Jim Cardwell to replace him on Wednesday.

Buena Vista, which also distributes titles from Miramax Home Entertainment, was a strong second overall--$3.7 billion and 18.2% of the market--and was runner-up in most categories. While Warner was leading the charge to lower prices, more sales and fewer rentals, BVHE stuck to its strategy of higher pricing and more profitability as it enjoyed a huge surge in the purchase of family movies on DVD. The studio had a 40% share of the family market (which saw vast growth of 94% in 2002 to $2.3 billion).

Disney execs claim they extract 60% more video revenue relative to box-office performance than any other studio on titles priced for retail on both VHS and DVD. For instance, Disney's Atlantis: The Lost Empire had a box office of only $84.1 million but sold 6.1 million copies on VHS and DVD for $130 million. Warner's Scooby-Doo, which had nearly twice the box-office at $153.3 million, sold 6.8 million copies for $118 million.

DreamWorks and its distributor Universal also maximized the video profits on its $73.2 million box-office release Spirit: Stallion of the Cimarron, with sales of nearly 6 million units.

The top title was Monsters, Inc., which sold 21 million copies, just shy of the 24 million that DreamWorks' Shrek sold in 2001.