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Home Video Business Doing Well Enough These Days

DVD's for sale
DVD's for sale

Forget about that doom and gloom scenario. At least the home video business is holding its own.

Despite the economic downturn, the high price of gas, tighter consumer spending, and the new competition of digital distribution, DVD and Blu-ray disc sales are surprisingly strong.

Consumer Spending on renting and buying DVDs and Blu-ray discs in the first half of 2008 was up 1.6 percent over the first half of last year to $10.77 billion. According to Home Media Magazine spending on buying discs grew 1.1 percent while spending on rentals was up 2.6 percent

So far digital downloads just aren't big enough to be a threat to the so-called "packaged media business." The download business may attract a lot of attention, but it's still small potatoes, an estimated $254 million in spending this year, according to Adams Media Research. This year Blu-Ray sales will bring in about three times that.

Blu-ray disc sales increased 340 percent this year so far compared to the first half of last year. This dramatic increase is a testament to the importance of Blu-ray winning the high-def format battle. Having HD-DVD and Blu-ray duke it out to be the dominant format just confused consumers and slowed down their purchases.

And why hasn't the economy hurt DVD sales? Apparently, DVDs are recession-resistant, a cost-effective option when spending is tight. In the early 1990s, video rental businesses stayed strong. Now the packaged media industry relies far more on selling DVDs, which is more profitable, than a $3 rental. The question now is, can the sale of DVDs hold up, or will people shift to the less expensive rental option. Or does buying a movie that you can watch over and over offer a great bang for your buck in this weaker economy?

Questions? Comments? MediaMoney@cnbc.com