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DVD sales forecast at four times B.O.

Veronis predicts surge by 2009

NEW YORK — DVD sales will surge to four times box office by 2009, raking in $40.4 billion to the B.O.’s $10.6 billion, according the latest forecast from Veronis Suhler Stevenson.

Spending on entertainment media — meaning mostly filmed entertainment, games and music — is seen surging to $124.3 billion in ’09 from $88.6 billion in ’04 and an estimated $94.9 billion this year.

The Gotham investment banking, consulting and private equity firm publishes the industry outlook each year, updating stats from the previous five years and looking ahead to the next five. Report, due out today, says box office will keep shrinking as a percentage of filmed entertainment spending as the overall sector expands on fresh coin from homevideo, digital video recorders and video-on-demand.

Torrid growth in the DVD market slowed in late 2004 and into ’05, but overall sales are still booming. They will pretty much annihilate videocassettes by the end of the decade.

Veronis Suhler sees DVD households surging to 99.2 million in 2009 from 64.5 million last year and an estimated 78.6 million this year. DVD spending is seen at $40.4 billion in ’09 from an estimated $26.7 billion this year.

Back in 1999, consumers laid out just over $1 billion on DVDs.

Hi-def future

As the domestic DVD market matures, studio execs have said they’re looking overseas and to new high-definition discs, which haven’t hit the market yet, to jump-start sales.

Videocassette spending will shrink from $15.4 billion in 1999 to an estimated $4.1 billion this year and $1.6 billion in 2009.

Veronis Suhler says the only reason the vidcassette market remains viable is that the current generation of DVD players lacks the ability to record. Some consumers are putting off purchase, or keeping their tape players, until then.

More than one-third of all theatrical DVDs sold are bought at Wal-Mart, which uses attractive disc pricing to get customers into the store to purchase higher-margin items.

$101 bil by ’09

Spending on filmed entertainment — including box office, homevideo, DVRs, wireless and VOD plus TV networks ponying up more for programming — is expected to hit $101 billion in 2009, up from $68 billion last year.

Box office spending, anticipating slightly lower admissions and slightly higher ticket prices, is seen rising to $9.65 billion this year from $9.54 billion in 2004. It’s seen hitting $10.6 billion in 2009.

Average ticket price of $6.21 last year and $6.32 this year is seen rising to $6.77 in ’09.

Veronis Suhler sees 1.536 billion tickets sold in ’04, easing to 1.528 billion this year and moving slowly up to 1.567 billion in ’09.

Admissions numbers are nearly impossible to predict, says James Rutherford, Veronis Suhler’s exec VP and head of investment banking. “The box office has seen cycles before of one or two down years, then it comes roaring back. You can be a couple of hits away from a great year.”

That said, he noted improved home theaters and plasma screens, the shrinking of theatrical windows and the slow rise of video-on-demand. “It has to have some impact,” he said.

Luckily for theater operators, the fast-growing cinema advertising biz will rise to $863 million in 2009 from an estimated $522 million this year, according to the report.

Downbeat on music

On the music front, despite a heartening up year in 2004, report sees music continuing a slow downward spiral through ’09 as a surge in digital download spending can’t offset declining CD sales.

Veronis sees sales of recorded music slipping to $10.95 billion in 2009 from $12.15 billion in ’04 — which marked the first up year in the industry since it started its downward spiral in the late ’90s. Spending will fall at an average rate of 2.1% a year for the period, slower than the 3.6% average annual dip in each of the previous five-years, 1999-2004. The share of recorded music spending within entertainment media will drop sharply to 8.8% in 2009 from 13.7% last year.

Firm sees $943 million worth of digital album downloads in ’09 from $139 million last year and $257 million anticipated this year. Music fans will spend $14.3 million to download singles from $4.5 million last year and $6.8 million this year.

Despite the competition, average CD prices will barely budge, easing to $14.52 from $14.93 in 2004. Average CD shipments will fall by 1.7% a year for the five years through 2009. They were down 4% a year in the preceding five years.

Videogame spending, including online and ad spend, is seen surging to $15.1 billion from $8.9 billion last year and an estimated $9.6 billion this year.

Veronis Suhler looks at the circa $900 billion spent on all forms of media and communications. It sends about 5,000 copies of the report to execs at the world’s biggest media companies, bankers, lawyers and others.

Stats are gathered from a large number of sources, including trade groups, consulting and advertising agencies and databases, including those of Variety.

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