DVD SALES TO REMAIN STRONG THROUGH 2015

WENDY TOTH

ENCINO, Calif. - DVD sales were up in 2005 despite decreases in consumer spending for theatrical box office, music and video games, according to the 2006 Annual Report on the Home Entertainment Industry, released by the Entertainment Merchants Association, here, formerly the Video Software Dealers Association.

The report estimates that consumer spending on DVD purchases and rentals will total $30 billion in 2015, compared to $11.7 billion in box office revenue, $9.8 billion for video-on-demand and $3.0 billion for pay-per-view, according to research from Adams Media Research, Carmel, Calif.

While consumers purchased 9% fewer movie theater tickets in 2005, the number of DVDs purchased increased by nearly 10% with consumers spending 6% more to purchase and rent programming in DVD format than in 2004, the report said.

DVD sales went up 3.7% in 2005 to $15.9 billion, while box office revenue saw a 6% decline to less than $9 billion.

"DVDs have become an excellent impulse item," said Jan Saxton, analyst, film entertainment, Adams Media Research.

"Their size, high price point, high margin and turn ratio makes them a great product, easy to stock and very profitable. The potential for return on investment is much higher than traditional grocery categories and better than most endcap and checkout line items," she said.

DVD provides the best combination of value and convenience of any entertainment option, and will continue to do so for the foreseeable future, Mark Fisher, vice president, membership and strategic initiatives, EMA, told SN.

"Fifteen dollars for a movie the family can watch together means DVD will continue to have huge sales and rental potential, even in the face of competing technology," Fisher said.

Consumers increased spending on all forms of video-on-demand by nearly 62% to $569 million in 2005, the report said. However, this is still much less than home video spending.

Rental spending was down about 4% to $8.5 billion. This number is an aggregate of an added 318 million DVD rentals vs. 437 million fewer videocassette rentals, according to the report.

Meanwhile, sales of previously viewed product rose nearly 10% in the past year, helping combined rental and sell-through spending reach close to $25 billion, the report said.

"Many supermarkets with rental departments sell previously viewed inventory to add to incremental sales and eliminate inventory," said Bill Bryant, vice president, sales, Ingram Entertainment, La Vergne, Tenn.