NPD: 2007 new release prices in line with 2004

Consumers willing to pay more for A-list titles

By Susanne Ault -- Video Business, 5/30/2008

MAY 30 | New release pricing has remained relatively stable since 2004, according to NPD Group, refuting conventional wisdom that DVD is becoming a commodity business as a result of falling prices.

It’s true that retailers regularly tag studio library titles below $5 these days, around a third of what they may have cost when they first streeted on DVD. But with new release DVDs, average pricing has fallen less than a dime over the past three years, from $17.27 in 2004 to $17.21 in 2007.

That trend holds up across various retail channels, including bookstores, mass merchants, electronics chains and music/video stores. At mass merchants, which are known for their heavy discounting, pricing on new releases has ticked up slightly, from $16.87 in 2004 to $17.14 in 2007.

NPD includes all available configurations of a new releases, including single-disc and two-disc special editions, in its pricing averages.

Retail and studio sources contacted said they are not entirely sure why new release pricing has turned out to be such a rock in the home entertainment business. But some speculate that as the DVD category matures, mass merchants and others cannot rely on new discs to lure in vast amounts of foot traffic on street date, making it a less desirable candidate for “loss leader” pricing.

“There was a time when you’d see $13.99 across the board [for a new release], but now it’s more like $17.99,” said a retail source. “I think they are finding they just aren’t the draw anymore, when people would come in for DVDs and you could drive them to other areas of your business. But if you maintain the higher price, and sell less, then you’ll do OK.”

The source adds that if anything, retailers may move to tap game-related products as loss leaders in replace of DVD. Grand Theft Auto IV, Guitar Hero III and other next-generation videogames seem to be basking in the ‘it’ media attention that DVD once enjoyed.

NPD entertainment analyst Russ Crupnick noted that regardless of retailers’ reasoning, consumers are mostly satisfied with today’s pricing on new releases.

In a survey conducted by NPD last year, more than 62% of respondents said the DVD they bought was a very good to excellent value at the price they paid.

Among respondents, 33% said it was an excellent value; 29%, very good; 26%, good; 10%, fair; and 2%, poor.

Although $15.50 was considered an optimal price to pay for a new release, consumers circled $19.61 as the highest but still fair price they would pay for a title.

“Consumers are still willing to pay for A-list titles, and retailers are accommodating them,” said Crupnick. “This talks to the power of content. If it’s something that they think customers want, the prices are staying up there from the retailers.”

He added that DVD has stayed steady when other media, such as music CDs, have free-fallen in new release pricing in recent years. Unlike DVD, physical CDs face stiff competition from widespread illegal and legal downloading.