REPORT: DVD RENTAL SURGES IN FIRST QUARTER

MARK HAMSTRA

ENCINO, Calif. -- DVD rentals grew at a torrid pace during the first quarter, according to a recent report by the Video Software Dealers Association, based here.

During the six-week period from Jan. 6 through March 17, the DVD share of the video rental market grew to 28.9%, or $542 million (172 million rental units). That's an increase of more than 12 percentage points over 2001, when year-end DVD rentals accounted for 16.6% of video rental spending. Spending on VHS through the six weeks was $1.32 billion.

The ratio of DVD to VHS spending was similar among new-release titles. Consumers spent $432.8 million renting 128 million new-release discs in the six-week period, vs. $920.6 million renting 282 million new-release tapes. The average cost per new-release tape was $3.27, vs. $3.39 for new-release discs, according to the VSDA report.

Supermarket video rental specialists said interest in the DVD format varies by store location, but some stores generate half their video rental revenues from DVDs.

"Some stores seem to be up to 50% in the rental of DVDs," said Craig Hill, video specialist, Harps, Springdale, Ark. "Right now, we probably average between 25% and 30%, with some stores up to 50%. Some areas don't have cable systems, and we've got a lot of people who watch them on computers."

Theresa Daniels, video manager, McMaken's Super Markets' McVideo, Brookville, Ohio, also said her DVD inventory is approaching the size of her VHS inventory.

"Some stores are probably 50% [DVD rental], some are maybe 35%," she said. "If I order 20 copies on VHS, I get 15 to 20 copies of DVD. I do get at least one DVD of everything, except some family/children's titles."

The VSDA maintains that VHS will continue to remain a popular format, however, citing data from research firm Centris, Santa Monica, Calif., which estimated that 15 million VCR players would be purchased in 2002. That's down only slightly from the 16 million purchased in 2001.

Also, according to Centris, 57% of DVD owners rented a VHS tape in 2001, and 48% of households have more than one VCR player.