A new report reveals that consumers are spending less on home entertainment—but it's not all bad news.
Spending on DVDs, Blu-Ray and digital distribution dropped 8 percent in the first quarter to $4.84 billion, on the heels of a 5 percent drop last year. And the rental business isn't picking up the slack: rental revenues fell 14 percent in the quarter.
The traditional DVD business is responsible for the majority of the bad news. The Blu-Ray business is still tiny but it's growing fast—disc sales grew 74 percent in the first quarter.
The real question, is what's next for digital sales, where margins are a lot higher. Total digital distribution—sell through and video-on-demand grew 27 percent to $617 million in the quarter. That's still just 12.7 percent of the overall market, but the growth is notable.
I spoke to a number of Wall Street analysts today who cover the media giants that have been struggling with declining DVD sales. They were remarkably unperturbed by these numbers. For one thing, they're unsurprised: DVD sales have been declining for a while. And if you factor in the economy, maybe things aren't as bad as they look.
If you figure half of the decline of DVD sales is due to a bad economy, and half of the decline is permanent and structural, then you're looking at an ongoing decline in the mid to high single digits for DVDs as the economy recovers, which is in line with expectations.