Blu-ray, Redbox fuel surge in spending

If the lackluster economy this year has been good to one business, it’s DVD rentals.

U.S. consumer spending on rentals of DVDs and Blu-ray discs surged 9.9% in the third quarter over the same period in 2008, according to Rentrak’s Home Video Essentials, as consumers cocooned with inexpensive entertainment.

Rental spending across both formats and all retail channels hit $1.6 billion in the quarter, fueled by big gains in Blu-ray and the growing popularity of Redbox.

For the full year through September, overall rental spending is up 8.2% to $5 billion, according to Rentrak. Top rental titles for the third quarter included “Knowing,” “I Love You, Man” and “Push.”

But DVD sales are another story. Consumer spending on DVD and Blu-ray purchases fell 13.8% in the third quarter, Rentrak estimates.

Consumers spent more than $111 million renting Blu-ray discs through bricks-and-mortar and online outlets in the third quarter, 44.5% more than a year earlier. Year-to-date Blu-ray rentals are up 53.8% to $313 million, Rentrak reports.

“The widespread distribution of Blu-ray titles into the primary rental channel is supporting the rapid adoption of the format by consumers, greater than what we saw on DVD,” Rentrak VP Brad Hackley said.

DVD rentals through traditional and online retailers are off 2.8% for the year to $4 billion.

Kiosk rentals such as Redbox still represent just about 14% of all rentals but have grown by more than 120% this year, as Redbox now has more than 17,000 kiosks in stores and Blockbuster and NCR gear up their kiosk joint venture.

Kiosks face new challenges in the fourth quarter, however, as 20th Century Fox Home Entertainment, Universal Studios Home Entertainment and Warner Home Video all impose a window for kiosks of four weeks or more after their titles’ general release. The three studios combined represent about 40% of the rental business.

The studios are concerned that inexpensive kiosk rentals and the used DVD inventory they create cannibalize higher-margin revenue streams, particularly DVD sales.

(Marcy Magiera is editor-in-chief of Daily Variety sister publication Video Business.)

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