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Avatar's Blu-Ray Record: Hope for Home Entertainment

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James Cameron's 3-D epic "Avatar" also holds remarkable appeal in a 2-D format — breaking home entertainment records in its first four days on sale.

The 20th Century Fox film quickly became the top-selling home entertainment title this year, and the fastest selling Blu-Ray ever, selling 2.7 million discs. The number two, "The Dark Knight" sold 2.5 million Blu-Rays in a year and a half. With "Avatar's" total Blu-Ray and DVD sales at around 7 million units, it's on track to be the biggest home entertainment release in years.

The success of "Avatar's" Blu-Ray launch bodes very well for the DVD business, which has suffered from double digit declines. Consumers eagerness to snap up "Avatar" discs — it sold a record 1.5 million its first day in stores — is a testament to the growth of the Blu-Ray format. Perhaps more importantly, it's a sign that consumers are willing to spend on Blu-Ray discs and DVDs. Bottom line: rumors of the death of the DVD business have been exaggerated.

Only about half of the double digit declines in DVD sales are from a secular shift away from the DVD business, according to some Wall Street analysts. The other half is a result of the downturn in consumer spending, from the weak economy. That's great news for the movie studios. It's not DVD Armageddon — DVD sales will recover as the economy returns.

The DVD business faces some major challenges, like the fact that consumers have rich libraries on their shelves already, and they're not compelled to add more discs because there are so many easy alternatives. Why invest in a $20 disc if you can order video-on-demand, or rent through Netflix or Redbox ? Last year was the first time since 2002 that Americans spent more on movie theater tickets than on DVDs and Blu-Ray discs. Unfortunately for the movie studios, other home entertainment options (not to mention piracy) are far less profitable for than DVDs.

Avatar is obviously extraordinary — it has the biggest box office (unadjusted for inflation) of all time — $2.713 billion worldwide. We've seen over the past few years that successful tent pole movies at the box office far outperform other films on DVD. This may sound obvious, but it wasn't the case for years — people indiscriminately devoured all sorts of DVDs. There's no question that has changed, but it is promising that Americans now own enough Blu-Ray disc players, that once consumer confidence returns, that business could get some legs.

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.