Overall sales drop 3-4% despite Blu-ray's rise

Homevid execs don’t have quite as much to cheer about at CES this year.

The biz, which had hoped for a turnaround by the end of 2008, is instead headed to the tech confab on a down note.

Final year-end results won’t start to trickle in for a few more days, but there’s little doubt that homevid spending ended down for the year. The vid biz is famously squishy about its sales figures, but all indicators point to a second consecutive decline, with Blu-ray gains unable to make up for declining DVD sales throughout the year.

The last available figures show DVD sales 5%-6% behind 2007 levels. Blu-ray sales jumped fourfold, making up a couple percentage points of the DVD deficit. Overall disc sales are expected to end 3%-4% below 2007’s $15.38 billion tally when the last disc sales for 2008 are calculated.

Total consumer spending on discs, rental included, should top $20 billion, as it has every year since 2002. However, that number is also projected to be down several percentage points from 2007’s $22.9 billion tally. Rentals were trending flat; downloads are not yet a meaningful part of the equation.

Preliminary year-end projections are falling in line with scaled down expectations for 2008, a challenging year for the vid biz, which is grappling with a transition to high-def formats and digital downloads. In 2007, the sector posted its first major spending decline, 3.1%, and execs had hoped for a turnaround when Warner Bros. effectively ended the format war by abandoning the rival HD DVD format on the eve of last year’s CES.

However, by Thanksgiving it looked increasingly unlikely that holiday sales would overcome a tough third quarter and challenging retail climate.

Still it could have been worse; the biz was not hit as hard by reduced holiday spending as other sectors. The day after Christmas, MasterCard’s Spending Pulse predicted that holiday general retail sales were down 5.5%-8%. Other yuletide economic indicators were gloomier: The Air Transport Assn. projected holiday air travel was down 9%. Car sales have been even harder hit lately.

“As far as I’m concerned, down is the new flat and flat is the new up,” one homevid exec said.

Disc sales were down 3.5% to $8.58 billion through the third-quarter, according to Video Business, suggesting that the sector held its own during the fourth quarter — its biggest revenue generator. “The Dark Knight,” “Iron Man,” “Kung Fu Panda” and “Wall-E” all sold briskly, earning them top spots on the bestseller list for the year along with earlier standouts such as “Alvin and the Chipmunks” and “I Am Legend.”

Typical of the vid biz, however, the actual rankings and sales are murky. “Alvin and the Chipmunks,” the top seller for much of 2008, is variously ranked at No. 2, No. 3 or No. 6 on late-year research reports. Sales numbers are especially squishy given the number of retail outlets selling discs.

The Digital Entertainment Group will weigh in next, issuing its year-end tallies Wednesday as the industry converges on CES.

A full contingent of homevid execs is expected at the confab this year, where they will once again sing Blu-ray’s praises. Although the format is not taking off as quickly as studios once hoped, holiday sales gave them cause for optimism. “The Dark Knight,” the year’s biggest seller on DVD, set an impressive benchmark for the next-gen format, selling 1.7 million copies worldwide in its first week. “Iron Man” also posted especially strong Blu-ray sales during the holiday shopping season.

By the end of the year, the format was selling a couple million units a week, generally at a heftier pricetag than standard DVD. As of Dec. 21, 22 million Blu-ray units had sold, a research report indicates; last year, 5.3 million units were sold. The format was closing in on the $750 million-$800 million target projected by several studios at a November DEG event, when earlier predictions of $1 billion in Blu-ray sales looked out of reach.

At the same session, execs predicted that it would take at least another year or two before Blu-ray begins to offset DVD declines.

“Privately, they’re all concerned,” one insider said.

However, digital downloads, now tiny, may help make up the shortfall by the end of 2009 (Daily Variety, Nov. 17).

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