DVD deluge in '03 fires up $22.2 billion year

<B>VB RESEARCH: </B>Disc spending up 40%; WHV, Buena Vista tight at top.

JAN. 7 | While fewer people bought tickets to movie theaters last year and spent less money at the box office, they continued to greatly increase their spending on DVDs.

Revenue from the purchase and rental of DVDs increased more than 40% to $16.3 billion, according to research by Video Business, with the average DVD player household buying 16.5 DVDs in 2003.

That pushed overall spending on home video (videocassettes and DVDs) to $22.2 billion, a 9.3% increase from 2002.

With less than $30 million separating them, Warner Home Video and Buena Vista Home Entertainment ended up with about $4.5 billion apiece to wind up in a virtual tie for the highest percentage market share of all the combined home video markets.

Buena Vista made big gains over last year with a string of DVD releases that included the two biggest animated movies of all time–The Lion King and Finding Nemo–and the two biggest theatrical hits of 2003–Nemo and Pirates of the Caribbean: The Curse of the Black Pearl. It edged Warner in overall sales with a commanding lead in the videocassette market.

Those Buena Vista releases, among others, gave the studio its biggest fourth quarter ever and helped it gain about two market share points and more than $700 million over 2002.

“We spent the bulk of the fourth quarter chasing reorders,” said BVHE president Bob Chapek.

Warner continued to be the front-runner in the high-growth DVD sales segment of the market with an enviable mix of its own blockbuster hits like My Big Fat Greek Wedding and the latest from the Lord of the Rings, Harry Potter and Matrix franchises; TV series like The Sopranos, Sex and the City and Friends; and an unmatched, steady stream of classic films from its enormous library.

Warner also had a slight edge in the rental market despite having only two of the top 10 titles: fifth-place Fat Greek Wedding from HBO Video ($74.3 million) and No. 10 Two Weeks Notice ($62.1 million).

For the first time, romantic comedies like Fat Greek Wedding and BV’s Sweet Home Alabama and a straight comedy–Bruce Almighty from Universal Studios Home Videoranked among the top 10 moneymakers for the year, balancing a list that is usually dominated by action films and family movies.

Seven titles generated more than $200 million in consumer spending, with Nemo and The Lord of the Rings: The Two Towers raking in more on home video than their gargantuan gross in theaters, with $431 million and $343.7 million from video, respectively.

Even the dramatic thriller Signs, with $202 million, represented somewhat of a new kind of film to do well on DVD as the result of the broadening market.

The Digital Entertainment Group will report this week that another 33.7 million DVD players were shipped into the marketplace in 2003, bringing the total since 1997 to more than 90 million. And another 1.02 billion DVD titles were shipped to dealers, bringing that total to nearly 2.4 billion.

That widening of the audience is reflected in stronger sales for dramas as well, with Universal’s Seabiscuit selling more than 7 million copies, a number usually only achieved by movies skewed to young male audiences and kids.

The industry also expanded the market to a newfound revenue stream for TV series and miniseries on DVD, with more than $610 million in new money for those titles expanding the overall TV category to roughly $1.5 billion.

“The biggest trend in 2003 was the fast-growth of the TV business outpacing overall growth of the category,” said Warner executive VP and general manager Ron Sanders.

While the first two seasons of the canceled Fox TV series The Family Guy was the top seller in terms of units (leading to talk of reviving the series), the pricier set of HBO’s Band of Brothers was the top TV moneymaker with $44 million.

“The success of Family Guy is something that could have only happened in the DVD era,” said 20th Century Fox Home Entertainment president Mike Dunn. “You’ve got a voracious core audience being given exactly what they want.”

Catalog titles also performed well, with Paramount’s boxed set of Indiana Jones movies generating more than $155 million.

Universal’s 20th anniversary edition of Scarface was also among the top sellers, selling about as many copies as Warner’s Terminator 3: Rise of the Machines. Sales of about 4 million copies for T3 were considered a disappointment for a movie that generated a respectable $150 million at the box office.

Universal distributed the top two rental titles with The Bourne Identity ($79.2 million) and Catch Me if You Can ($75.5 million).

The VHS market continued to decline, leaving many studios drastically cutting back or eliminating entirely the movies they release on videocassette.

“All of us are in a very cautious mode in terms of what inventory to build for VHS,” said MGM Home Entertainment Group president David Bishop. “I don’t expect it to be around in three or four years.”

With most of its major theatrical releases bunched in the first half of the year, DreamWorks Home Entertainment surpassed $1 billion in consumer spending for the first time (a 47% increase over 2002), led by Catch Me if You Can, The Ring and Old School.

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