Launching globally a year after its U.S. introduction in 1997, DVD had to play catch-up for a while in the international markets.For U.S. suppliers, the good news is that today, the aggregate foreign market is almost on par with the domestic one. For the first eight months of 2006, for example, DVD purchases outside the U.S. generated about $8.8 billion, according to Media Control GfK Intl., which collects point-of-sale data from retailers around the world. For comparison, in the U.S., consumer purchases of home entertainment, primarily DVD, represented $9.1 billion for this year through mid-September. Unfortunately, besides offering comparable size, the international disc market now has some comparable challenges — for one, it’s not growing anymore. In Western Europe, for instance, sell-through revenue was off 7.4% through the first six months of ’06, while unit sales were down a comparable 7.7%, according to Media Control GfK. In English-speaking territories such as Australia, New Zealand and the U.K., unit sales were actually up 10.2%, but revenues fell 1.1% to $2.6 billion due to downward price pressure. “Even though many international markets were beginning DVD development later than in the U.S., they pretty much matured at the same time,” says Buena Vista Worlwide Home Entertainment president Bob Chapek. “In 2005, DVD stopped across the world as a growth engine.” In aggregate, the international market is flat on volume, but is experiencing “a value decline that is directly driven by price declines,” says Kelley Avery, worldwide homevid prexy for Paramount. In the U.K., she says, prices have declined an average of 12% recently, representing the biggest drop for any territory. Avery attributes declining prices to a shift in consumer taste — away from more profitable new-release hits and toward catalog. In fact, older titles represent 75% of units sold abroad in 2006, but only 64% of revenue, according to Media Control GfK. In 2005, catalog repped 70% of units and 59% of revenue. Avery also notes that foreign retailers are quickly reducing prices on new releases. That dynamic is driven by the fact that store sizes outside the U.S. are generally smaller, making the competition for both display space and retail advertising dollars more fierce. Meanwhile, international markets face unique challenges. In some territories — particularly in developing countries — pirated product can account for as much as 90% of the consumer DVD market. Other territories, notably South Korea, have highly developed broadband entertainment markets that have helped limit the growth of DVD. As in the U.S., studios are looking to new high-definition disc formats HD DVD and Blu-ray to reignite growth. Adrian Alperovich, senior exec VP of international for Sony Pictures Home Entertainment, says the studios are “slugging it out in a mature market,” but have new growth opportunities in high-def disc formats, as well as electronic distribution. In fact, Blu-ray and HD DVD could help the majors tap into tough markets just the way DVD helped ease their entry into territories that weren’t big on VHS several years ago. In broadband-dominated markets like Japan in South Korea, for example, such a hi-def disc format could gain a foothold, since Internet delivery of hi-def content still has a way to go.