Slide is biggest decline of format's era

With no “Wedding Crashers” or other hit title to kickstart the first quarter this year, homevid spending took its biggest dip in the DVD era, sliding 5.1% to $5.6 billion in the period.

Homevid sales dropped 7.8% to $3.5 billion while rental was off 1% at $2.1 billion, according to Video Business research.

But homevideo execs remain encouraged, blaming the downturn entirely on a weak release slate.

The cumulative box office on new releases coming out in the first quarter was $2 billion, down 14% from last year, when “Wedding Crashers” led off a quarter that also included “Harry Potter and the Goblet of Fire,” “Walk the Line” and “King Kong.”

All were among the top DVD performers in 2006, and each sold more than this year’s top seller, “The Departed,” which moved less than 6 million units, a strong showing for a film of its size.

Warner’s “Happy Feet,” another strong performer, came close to overtaking “Departed” in sales with only one week in stores before the end of the quarter.

“Coming out of the first quarter, we’re very optimistic,” says Ron Sanders, president of market leader Warner Home Video. “Individual titles tend to be overperforming their historical comparisons.”

Other studios reported the same. Most expect the year to end up in the plus region in terms of year-to-year growth because of the massive summer theatrical slate that will make its way to disc by year’s end.

“It’s very much release driven,” says Simon Swart, Fox Home Entertainment executive VP and general manager. Fox saw strong performance on “Borat,” “Eragon” and family film “Flicka” during the quarter.

When including distribution of MGM product, which Fox took over last year, the studio took the No. 2 spot in market share.

Sony Pictures Home Entertainment officials say nearly every release on their slate in the first quarter outperformed internal projections.

The studio held the No. 3 spot in market share, with strong sales and rentals on January release “Open Season” and March top sellers “Casino Royale” and “Pursuit of Happyness.” “Casino Royale” is on track to be the top-selling Bond movie on the format, according to David Bishop, Sony homevid worldwide prexy.

Like Sony, Paramount, which now distributes DreamWorks, also grew its market share during the period, witnessing strong sales on “Flushed Away” and “Flags of Our Fathers.”

“We’re seeing a very healthy standard DVD business with incremental growth driven by high definition and digital,” says Kelley Avery, Paramount Pictures worldwide president of home entertainment.

In fact, sales of Blu-ray, HD DVD and digital downloads more than compensated for the fading VHS format, which has dragged down the industry’s overall growth in past years.

Next-generation format sales reached roughly $30 million in the quarter, according to VB research.

But until those formats reach a broader audience, DVDs growth will remain dependent on the new release slate, execs say. Buena Vista Worldwide Home Entertainment saw strength in all segments including family and classics, says Lori MacPherson, North American general manager for the Disney unit.

The platinum release of “Peter Pan” outsold the two earlier releases of the film, and DVD premiere “Cinderella III: A Stitch in Time” equaled last year’s DVD premiere “Bambi II.”

Part of the reason for the lack of big new releases was that studios packed the fourth quarter of 2006, leaving January and February considerably light.

“Historically there has been a fifth quarter,” says Universal homevid prexy Craig Kornblau. “What would happen at Christmastime is there’d be new DVD consumers, and if there weren’t new DVD consumers, multiple DVD players were being bought for the house.”

Studios would release big films in January to capture those new DVD households rushing out to buy movies for their new players.

But the number of households buying new players has slowed over the last few years, and Kornblau says studios opted this year to put their big films out before Christmas to catch holiday crowds instead.

Lionsgate, noticing the light slate from competitors, decided to do the opposite and packed “Crank,” “Saw III,” “Employee of the Month” and Marvel direct-to-DVD release “The Invincible Iron Man” into January.

“It wasn’t an accident,” Lionsgate prexy Steve Beeks notes. “January is one of the best months of the year in which to release movies, particularly our types of movies. We saw the industry putting so much product into December and into later February, so we focused on January as a strategy.”

The strategy paid off, with the studio turning in its biggest first quarter ever, Beeks says.

New Line released blog sensation “Snakes on a Plane” the first week of January, a time frame that has benefited other action and male-oriented films in recent years including “The Fast and the Furious” and “XXX.”

But “Snakes” was an unusual title. After strong initial buzz fizzled into a disappointing theaterical release, there was hope for a strong showing on DVD. “It just didn’t materialize,” concedes Matt Lasorsa, New Line Home Entertainment executive VP of marketing.

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