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Disc bliss for biz

Homevid hit parade keeps marching on

“The Passion of the Christ” was not as big a DVD hit as many predicted, but titles including “Rundown” and “Out of Time” surpassed expectations.

And the DVD business more and more has taken on the rhythms of tentpole releases: Up to 70% of the sales are jammed in the first week. Meanwhile, DVD consumers are spending more than ever on TV shows.

Those are the principal results of a year-end analysis of the homevideo marketplace, which posted a healthy 8.5% gain to reach a record $24.1 billion in consumer spending.Warner was the clear market share leader with 19.7%, nearly three points ahead of Disney; the two studios were in a virtual dead heat last year.

While the rental market was off just 0.4% to just over $8 billion, the sales sector was well into double digits again, with a 15% gain in 2004 pushing that side of the market to $16.1 billion. More than 94% of the money spent on the purchase of homevideo programming last year — $15.2 billion — was for DVDs, up from $11.9 billion (85%) in 2003. Figures represent rentals and purchases of both DVD and videocassettes.

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The year’s top-grossing movie, “Shrek 2,” was also the year’s top DVD, with U.S. consumers spending $377 million to buy and rent the homevid version. “The Lord of the Rings: The Return of the King” once again landed in the second spot with $310 million.

No records

But unlike last year, when spending on homevid versions of “Finding Nemo” and “Lord of the Rings” surpassed the pics’ box office grosses, and spending on the top seven homevideo titles met or exceeded theatrical box office, none of the top six homevideo titles of 2004 even reached theatrical revs. While some thought “The Passion of the Christ” might reach “Titanic”-sized video numbers and become the first nonanimated title to crack the 20 million unit mark, it came in at about 12 million copies and $125 million less than its box office. Mel Gibson prevented Fox from heavily advertising the title, with Fox restricted on the types of promotional marketing it could pursue.

On the other hand, Universal’s “Rundown,” MGM’s “Out of Time” and Disney’s “Brother Bear” and “Open Range” each generated more than twice as much spending on DVD than at theaters.

Fox frenzy

Most studios saw modest increases or declines in market share from the prior year, with the exception of Fox, which jumped to its biggest year ever, with $3.11 billion on the strength of third-ranked DVD “Passion,” fourth-place “Star Wars Trilogy” and seventh-ranked “The Day After Tomorrow.”

The average buy rate for DVDs held steady at 13-14 per year, but consumers are increasingly spreading their dollars around to TV shows on DVD, older films and smaller box office fare. TV DVD sales skyrocketed 62% in 2004 to $2.3 billion. Sales of catalog DVDs — those out for 12 weeks or more — were up 21% to $6 billion.

While buy rates are steady, Buena Vista exec VP of sales and distribution Pat Fitzgerald said the latest research shows the newest DVD consumers are buying fewer discs. “Households coming in now are not buying as frequently as (new households) in the past. They’re more fickle,” he said.

More competish

There’s also more DVD competition than ever before, with the number of releases up 25% in 2004, according to Fox. That has meant a fierce battle for shelf space and more pressure to ship the right amount of product to stores and to sell it off as quickly as possible.

“It’s difficult to ship the same number you would have shipped a few months ago,” said Steve Beeks, president of Lions Gates Home Entertainment, which now commands 4% of the market after merging with Artisan last year. “There’s more competition for space, for dollars.”

Sales of new-release DVD titles are mirroring box office trends more and more. Up to 70% of sales are now in the first week. Studios face more pressure from retailers to sell off titles quickly because of the limited shelf space to hold the onslaught of releases.

“We have to try to change the paradigm at major retailers to extend the life to new releases,” said Fox Home Entertainment president Mike Dunn. “They need to dedicate more space to bestsellers.”

Short shelf life

The fight for shelf space has placed more importance on marketing than ever before, said Universal’s Craig Kornblau. “It’s gonna be a tough year,” he said.

U, which includes sales of DreamWorks titles, for which it handles distribution, came in No. 3 with a 14.7% take of the market and an estimated $3.54 billion in consumer dollars. DreamWorks accounted for roughly $1.4 billion of that. The studio had its biggest year ever, with a fourth quarter slate that also included “Collateral” and “The Terminal.”

(All numbers are according to Variety sister publication DVD Exclusive.)

(Jennifer Netherby is a reporter for DVD Exclusive.)