Q1 spending lags on lack of hits
Early-year titles had 14% less box-office, but sequels will pack second half
By Jennifer Netherby -- Video Business, 4/23/2007
APRIL 23 | With no Wedding Crashers equivalent to start the party, consumer spending on home video slid 5.1% to $5.6 billion in the first quarter of 2007.
The cumulative box-office on new releases issued in this first quarter was $2 billion, down 14% from last year, when Wedding Crashers kicked off a quarter that also included Harry Potter and the Goblet of Fire, Walk the Line and King Kong. All were among the top DVD performers in 2006, and each sold more than this year’s top-seller, The Departed. Sources said The Departed, from Warner Home Video, sold less than 6 million units, a strong showing for a film of its size.
Warner’s Happy Feet, another strong performer, came close to overtaking The Departed in sales following its late March release, but had only one week in stores before the quarter closed.
“Coming out of the first quarter, we’re very optimistic,” said Ron Sanders, president of market leading Warner. “Individual titles tend to be overperforming their historical comparisons.”
Other studios reported the same, taking it as reassurance that consumers aren’t simply tiring of DVD entertainment.
Sony Pictures Home Entertainment said nearly every release on its slate in the first quarter out-performed its own internal projections. The studio posted a strong showing with sales and rentals on January release Open Season and March hits Casino Royale and The Pursuit of Happyness.
Casino Royale is on track to be the top-selling Bond movie on DVD, SPHE worldwide president David Bishop said.
Like Sony, Paramount Home Entertainment, which now includes DreamWorks, also grew its market share during the period, seeing strong sales on Flushed Away and Flags of Our Fathers.
“We’re seeing a very healthy standard DVD business with incremental growth driven by high-definition and digital,” said Kelley Avery, Paramount Pictures worldwide president of home entertainment.
Sales of Blu-ray Disc, HD DVD and digital downloads more than compensated for the fading VHS format, which has dragged down the industry’s overall growth in past years. Next-generation sales reached roughly $30 million in the quarter, according to some studios, while VHS sales hovered around $5 million.
But until the high-def formats reach a broader audience, DVD’s growth will remain dependent on the new release slate, execs say.
“It’s very much release-driven,” said Simon Swart, 20th Century Fox Home Entertainment executive VP and general manager. The studio saw strong performance on Borat, Eragon, Flicka, The Marine and The Illusionist during the quarter.
Buena Vista Worldwide Home Entertainment saw strength in all segments, including family and classics, said BVWHE general manager for North America Lori MacPherson. The platinum release of Peter Pan outsold the two earlier releases of the film, and DVD premiere Cinderella III: A Twist in Time equaled last year’s DVD premiere Bambi II.
“The only thing down was new releases,” MacPherson said.
Part of the reason for the quarter’s softness was that studios packed the fourth quarter of 2006, leaving January and February light on hits.
“Historically, there has been a fifth quarter,” said Craig Kornblau, Universal Studios Home Entertainment president. “What would happen at Christmastime is there’d be new DVD consumers, and if there weren’t new DVD consumers, multiple DVD players were being bought for the house.”
Studios would release big films in January to capture those owners rushing out to buy movies for their new players. But the number of households buying new players has slowed over the last few years as the format reached mass penetration, and Kornblau said studios opted this year to put their big films out before Christmas to catch holiday crowds instead.
Noticing the light slate from competitors, Lionsgate decided to do the opposite and packed Crank, Saw III, Employee of the Month and Marvel direct-to-DVD release The Invincible Iron Man into January.
“It wasn’t an accident,” Lionsgate president Steve Beeks said. “January is one of the best months of the year in which to release movies, particularly our types of movies. We saw the industry putting so much product into December and into later February, so we focused on January as a strategy.”
It paid off, with the studio turning in its biggest first quarter ever, Beeks said.
New Line Home Entertainment also released blog sensation Snakes On a Plane the first week of January, a time frame that has benefited other action and male-oriented films, such as The Fast and the Furious and XXX.
But Snakes was an unusual title. Hyped on blogs, it failed in theaters but seemed like a title that might overperform on DVD. But it didn’t come close to doing the business that Wedding Crashers did a year earlier.
“It just didn’t materialize,” said Matt Lasorsa, New Line executive VP of marketing.Top 20 DVD sellers (all formats)
| Rank | Title (Label/Distributor | Release Date |
| 1 | The Departed (Warner) | Feb. 13 |
| 2 | Happy Feet (Warner) | March 27 |
| 3 | Open Season (Sony) | Jan. 30 |
| 4 | Casino Royale (MGM/Sony) | March 13 |
| 5 | Cinderella III: A Twist in Time (BV) | Feb. 6 |
| 6 | Flushed Away (DW/Par) | Feb. 20 |
| 7 | Peter Pan (BV) | March 6 |
| 8 | The Guardian (BV) | Jan. 23 |
| 9 | Borat (Fox) | March 6 |
| 10 | Saw III (LG) | Jan. 23 |
| 11 | Eragon (Fox) | March 20 |
| 12 | The Pursuit of Happyness (Sony) | March 27 |
| 13 | Flicka (Fox) | Feb. 6 |
| 14 | Gridiron Gang (Sony) | Jan. 16 |
| 15 | The Prestige (BV) | Feb. 20 |
| 16 | Flags of Our Fathers (DW/Par) | Feb. 6 |
| 17 | The Marine (Fox) | Jan. 30 |
| 18 | Crank (LG) | Jan. 9 |
| 19 | The Illusionist (Fox) | Jan. 9 |
| 20 | Blood Diamond (Warner) | March 20 |
Source: Video Business research; YTD through April 1
