DVD spins bigger coin
VHS still a drag, but consumer spending rose in 2006
By Jennifer Netherby -- Video Business, 1/5/2007
JAN. 5 | After a volatile 2005 that saw home video spending shrink for the first time ever, the industry steadied itself in 2006, with consumer spending on sales and rentals of DVD and VHS up 0.5% to $23.6 billion for the year, according to Video Business research based on Rentrak Corp. data and studio sources.
Consumer spending on DVD purchases rose 4.6% to $14.90 billion in bricks-and-mortar outlets, according to Rentrak’s Retail Essentials point-of-sale tracking service.
Adding online sales pushed total DVD sales to about $15.65 billion, also up 4.6%.
Buena Vista Worldwide Home Entertainment owned the Top 3 slots with Pirates of the Caribbean: Dead Man’s Chest, Cars and The Chronicles of Narnia: The Lion, the Witch and the Wardrobe. (Click here for the list of top titles.)“That’s something that has never happened,” said Lori MacPherson, general manager of North America for BVWHE. “It’s a fantastic outcome.”
The disc rental business also rebounded, with DVD rental spending up 10.3% in 2006 to $7.39 billion, according to Rentrak’s Home Video Essentials.
However, VHS continued to drag down the industry as the format fades. The overall rental business slipped 1.5% to $7.67 billion for the year. Overall sales, including VHS and DVD, grew 1.4% to $15.91 billion. Sales of high-definition discs and other formats were still miniscule.
Buena Vista also had the top-renting film of the year, Flightplan, followed by New Line Home Entertainment’s Wedding Crashers, 20th Century Fox Home Entertainment’s Walk the Line and Paramount Home Entertainment’s Failure to Launch.
Warner Home Video president Ron Sanders said 2006 is likely to be the last year that VHS revenue will drag down the business.
“Next year, if VHS holds its own and we replace the VHS drag with HD DVD and Blu-ray high-definition sales, then we could show some really strong growth in the business,” he said.
Although movie downloads and high-def disc sales were media darlings for much of the year, revenue from both represented less than 1% of 2006 DVD revenue.
“There’s always new technology that’s sexy and gets all the buzz, but when the rubber hits the road, consumers are still in love with their DVDs,” Fox executive VP and general manager Simon Swart said. “The message of the year is to take care of the business at hand.”
That seemed to do the job, as nearly ever segment of the DVD business gained in 2006.
“Studios came to the floor with ideas on how to continue to increase growth in the business,” said Lionsgate president Steve Beeks. “It is still an incredibly healthy business. … There was never anything wrong with the market; we just had to adjust to a market that was slowing its growth.”
Consumer spending on new releases was up for the year, according to studios, driven by big theatrical releases Pirates, Cars and Harry Potter and the Goblet of Fire. Plus, consumers continued to increase the money they spent on theatrical new releases on DVD compared to what they spent on those same films in theaters, Paramount Pictures worldwide president of home entertainment Kelley Avery said. At Paramount, for example, consumers spent 17% more on theatrical new releases on DVD than they did in theaters.
“It’s proof that consumers really remain enamored with the home entertainment options that are available today in the marketplace,” Avery said.
Catalog revenue also grew even as pricing remained competitive. And it wasn’t just low-priced catalog that sold—higher-priced multi-film collections such as a John Wayne set from Warner showed strong sales.
Despite losing distribution of the MGM Home Entertainment catalog in the second half of the year when the studio switched to Fox, Sony Pictures Home Entertainment nonetheless saw 27% growth in its catalog business. Aggressive promotions around Black Friday in November drove library unit sales up 140% for Sony.
“I think primarily it was really working with retailers further in advance than we had before and crafting programs specifically designed for them,” SPHE worldwide president David Bishop said.
TV shows were one of the strongest segments of catalog.
“There’s still a lot of demand for new releases on TV, but also as new releases are played out, the catalog continues to have huge strength as well on DVD,” Warner’s Sanders said.
Although TV new release sales were down due to fewer releases, unit sales on individual releases were up. Typically, the first season of a show sells more than second and third seasons, but BVWHE said both Lost: Season 2 and Grey’s Anatomy: Season 2 outsold the first seasons.
The closing of Tower Records had an impact on niche content from smaller suppliers, which rely more on specialty retailers to stock their titles. However, online growth limited the impact some.
“We’re seeing Internet retailers play an increasing role in that space than in the past, so it had less impact than it would have,” said Genius Products CEO Trevor Drinkwater.
Genius’ growth rocketed this past year as it moved from a specialty supplier with $30 million in annual revenue to more than $390 million in revenue last year after signing on to distribute DVDs for The Weinstein Co.Top DVD Titles of 2006
| Rank | Title | Studio | Release Date | Revenue* |
| 1 | Pirates of the Caribbean: Dead Man's Chest | Buena Vista | Dec. 5 | $293.8 |
| 2 | The Chronicles of Narnia: The Lion, the Witch, and the Wardrobe | Buena Vista | April 4 | 282.3 |
| 3 | Cars | Buena Vista | Nov. 7 | 269.0 |
| 4 | Harry Potter and the Goblet of Fire | Warner | March 7 | 226.9 |
| 5 | Wedding Crashers | New Line/Warner | Jan. 3 | 176.3 |
| 6 | Walk the Line | Fox | Feb. 28 | 175.7 |
| 7 | King Kong | Universal | March 28 | 171.3 |
| 8 | Over the Hedge | DreamWorks/Paramount | Oct. 17 | 167.4 |
| 9 | The Da Vinci Code | Sony | Nov. 14 | 133.7 |
| 10 | Ice Age: The Meltdown | Fox | Nov. 21 | 132.8 |
| 11 | Chicken Little | Buena Vista | March 21 | 127.3 |
| 12 | Click | Sony | Oct. 10 | 110.5 |
| 13 | X-Men: The Last Stand | Fox | Oct. 3 | 109.8 |
| 14 | Talladega Nights: The Ballad of Ricky Bobby | Sony | Dec. 12 | 102.8 |
| 15 | Flightplan | Buena Vista | Jan. 24 | 101.1 |
| 16 | Superman Returns | Warner | Nov. 28 | 92.1 |
| 17 | The Devil Wears Prada | Fox | Dec. 12 | 85.6 |
| 18 | High School Musical | Buena Vista | May 23 | 82.2 |
| 19 | Bambi II | Buena Vista | Feb. 7 | 77.1 |
| 20 | Grey's Anatomy: Season 2 | Buena Vista | Sept. 12 | 67.5 |
