Consumers cutting back on DVDs, CDs, books
Anyone who still believes showbiz is recession-proof ought to have their head examined.
The old rules do not apply to the current downturn. This recession has affected media consumption in ways recent predecessors did not.
Consumers cut way back on homevideo, CD and book purchases during the holiday shopping season, and show no sign of reacquiring their old spending habits any time soon. Broadway producers shuttered a staggering number of shows due to weak post-holiday ticket sales. Plummeting ad sales have wreaked havoc on publishing and TV. Even the white-hot videogame sector felt the economic pinch late last year, with growth slowing to a mere 19% for 2008.
Theatrical moviegoing has been relatively unaffected, but that resilience is only moderately reassuring to studios, which are under pressure on several other fronts. Homevideo is a key component of the studios’ revenue streams, and DVD sales declined even more steeply than expected during the fourth quarter. Already under pressure to cut cost by corporate parents, the studios are now trying to use weakening DVD sales as leverage in talent negotiations.
The big question, still unanswerable, is: When will media consumption return to normal?
With the holidays over, consumers have even fewer reasons to open their pocketbooks and fewer hit titles to tempt them.
The vid biz has arguably the most challenges to overcome if it is to avoid further wrenching declines in coming months. While the music biz also suffered double-digit declines over the holidays, it tends to get a sales boost around the Grammys and Valentine’s Day, and has a Bruce Springsteen album arriving this week. The book biz, meanwhile, is suffering on the adult side, but according to BookScan ended the year flat on strong juvenile sales from the “Twilight” series.
The vid biz, by contrast, is at an awkward stage of its format transition to Blu-ray, a pricier next-gen format, and is also trying to grow its download biz. It has entered what is typically a slow time for sales; “Madagascar 2,” arriving Feb. 6, is the biggest bow skedded until “Twilight” and “The Quantum of Solace” arrive late in March.
“Clearly, the business is susceptible to economic pressure,” says Tom Adams of Adams Media Research, who calls uncertainty over the severity of the recession “a huge wildcard.”
Adams initially predicted the recession wouldn’t affect the sector one way or another, based on his analysis of the 1990-91 and 2000-01 recessions. But the sharp dip in consumer confidence when banks began to fail and the maturity of the dominant DVD format proved a deadly combination.
According to Video Business, DVD sales declined 11% for the year, and overall disc sales, Blu-ray included, dropped 8.5% to $14.07 billion.
The vid biz is so used to strong year-end finishes that, analysts were still projecting just a 3% to 5% sales decline for 2008 until the final numbers tickled in January. Consumers simply did not buy as many discs during the holidays as in the past; early January disc sales are also lagging slightly behind a year ago.
“We’ve got to accept that it might be down for a while,” says one home-entertainment topper.
Soft new-release sales are a big concern. A few hits like “The Dark Knight” and “Mamma Mia!” sold well during the holidays but not so fantastically that they made up for all the titles that underperformed — “and there were a lot of those,” the home entertainment topper points out.
And second-tier box office titles, which aren’t as likely to be discounted as a loss leader by retailers, have been squeezed by those lower-priced hits and cheaper catalog fare. “What we’re seeing is that people don’t want to spend a lot,” says Amy Jo Smith, exec director of the Digital Entertainment Group trade org. “DVD sales of new releases were down — a lot,” but catalog sales were up overall.
Rental transactions were also up slightly for the year, although revenue was flat at $7.6 billion due to a huge spike in cheap kiosk rentals.
Smith predicts that studios will begin testing lower prices on Blu-ray to overcome financial hurdles. “They’ve got to,” she says.
For NPD analyst Russ Crupnick, the greatest fear is that retailers and studios will cut back on marketing mid-tier titles — those of moderate theatrical box office — to cut costs. This, he predicts, would cause a death spiral similar to the one the music biz suffered. Already, he notes, reduced foot traffic in stores has cut back on impulse buys.
The good news, observers say, is that consumers have not lost their appetite for entertainment. Pockets of entertainment, especially digital, will continue to do well. Last week, Apple posted a record quarter for its iTunes Store, and said it had the biggest Christmas Day and Christmas week ever.
Even Broadway, with all its shuttered shows, is drawing sellout crowds to plays such as “August: Osage County,” and busy producers like Jeffrey Richards are trying to raise coin for the planned revival of “Hair.” Poorly reviewed comedies like “Paul Blart: Mall Cop” still draw crowds at the multiplex.
And one lesson from the past does appear to be holding true in this downturn: Americans want a diversion from distressing financial headlines.