Videos are making big money for movie studios — just look at sales for Disney’s blockbuster “Aladdin.” The outlook for the rental marketplace, however, is far less rosy.
Videos are undeniably a huge part of the entertainment world, but the business already may be peaking. The emergence of options such as pay-per-view and multichannel cable have attracted consumers who appear to be testing those avenues, partially because of the convenience.
“The video rental market was a nice, strong growth market when we were all buying VCRs, but it’s been mature for a while,” said Sharon Williams, a entertainment analyst with Prudential Securities Research.
Such remarks raise the ire of the Video Software Dealers Assn., which says the demise of homevideo is greatly exaggerated.
“Last year was among the highest in terms of sales of VCRs,” said Bob Finlayson, VSDA spokesman, noting that the TV/VCR combination has become particularly popular over the past year. “They must be buying those things for a reason.”
Indeed. The animated box office hit “Aladdin” was a winner for Disney in the homevideo market, and the international homevid release of the animated “The Jungle Book,” a perennial children’s favorite, helped spur a 45% rise in operating income in Disney’s filmed entertainment division, to $ 340 million.
“The sell-through market is staying strong for those targeting kids — like Disney,” said Williams. But Williams asserts the video business no longer has the hot growth of the past. Generally, the only growth is in the sell-through marketplace, which increased 20% last year, while rentals remained flat.
Studies show consumers rented 4.48 billion videos, paying $ 11.2 billion, a figure that has remained steady for the past two years, eking out a 6% growth rate in 1993.
Videos, however, far eclipsed movie theater attendance, which has remained at a constant 1 billion a year in the United States and Canada, with box office receipts at around $ 5 billion yearly.
Industry sources say 40% of households with VCRs will rent videos during a given week, renting an average of four videos. The number of households with VCRs, approximately 84%, has held steady and is not expected to grow significantly.
According to Alexander & Associates, a management and research firm that tracks the homevideo market, video sales are made mostly to consumers who are looking at videos the way many people look at books — things to collect and review time and again.
PPV proponents assert video-on-demand will become more popular when the price drops, or when the 500 channel superhighway creates an onramp in their living room. But Finlayson points to the disparity in growth figures between video and PPV as proof that video continues to be the format of choice.
“The whole PPV shooting match is worth only $ 430 million,” Finlayson said. “They’ve had 16 years to get it together, and it hasn’t happened. When you consider homevideo is worth $ 4.3 billion, and growing, there is little doubt which is the more popular and profitable industry.”
In an addition, there is usually a long lag between a movie’s release and its appearance on pay-per-view. Movie studios are even increasing the time before theatrical runs appear on pay-per-view — now up to a year — giving video rentals a distinct advantage.