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How Bad is the DVD Decline and Who Suffers?

Friday, 17 Jul 2009 | 4:28 PM ET

DVD sales used to be the bread and butter of the movie studios business, even more important to the bottom line than box office receipts. But thanks to shifting consumer patterns and the recession, home video sales are stuck in the kind of decline that's making studio chiefs think about reinventing the business model.

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Now some new data reveals just how bad the home video business is: DVD sales fell 13.5 percent in the first half of the year according to Digital Entertainment Group.

It's not that piracy has replaced DVD sales — broadband capacity is still too limited for that — but people are opting to rent rather than buy.

Here's the good news:

Movie rental revenue grew 8 percent in the first two quarters, which helps Netflix , Blockbuster and Redbox.

This makes sense: Americans are consuming more entertainment, staying home and avoiding shopping and travel, but they don't feel compelled to add more DVDs to their library.

Blu-Ray sales rose 91 percent in the first two quarters, but that business is still very niche, just $408 million. Unlike the transition from VHS to Blu-Ray, we're not going to see the same kind of purchasing.

Why not?

The answer is that DVDs don't seem outdated, and there are plenty of digital distribution options, both legal and illegal.

On-demand movies, through cable or satellite video-on-demand or online streaming, grew 22 to $968 million.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.