DVD growth gets stuck in slo-mo

Biz stalls as spending hits low

The robust salad days of homevideo growth are starting to look like a distant memory.

Homevid spending through July 2 grew just 1.1%, a record low.

“It’s the beginning of the mature phase of the DVD market,” said Buena Vista Home Entertainment president Robert Chapek, who noted that consumers just now entering the market are not buying as many DVDs.

Fox Home Entertainment says new DVD consumers are buying only about seven per year — half the number of the early adopters.

All of this comes as Pixar and DreamWorks have taken their lumps over more-than-expected returns on “The Incredibles” and “Shark Tale,” respectively.

Still, the numbers stagger: Overall spending so far this year has hit $11.4 billion, and studios are still coveting the typical 60%-100% return they get on most every DVD dollar spent.

Fifteen titles raked in more than $100 million in the first 26 weeks of the year — five more pics than at movie theaters.

Returns aside, the big winner was “The Incredibles,” which generated $315 million, more than $50 million over the title’s box office gross and nearly $120 million more than the second top moneymaker, “National Treasure” ($196 million), also from Disney.

Six of the top 20 — Universal’s “Ray” and “Friday Night Lights”; Buena Vista’s “Ladder 49,” “Shall We Dance” and “Finding Neverland”; New Line/Warner Bros.’ “The Notebook” and Fox’s “Napoleon Dynamite” — did roughly double the business on homevideo than at theaters.

Among distribs showing the biggest gains, Fox saw revenue rise more than 30% over the same period last year. Contributing to the studio’s $1.5 billion haul were 12th-ranked “AVP: Alien vs. Predator” ($107 million) and 13th ranked “Napoleon Dynamite” ($104 million, not including the first 10 days of sales during the holidays in 2004).

Punching in

“We’re punching above our weight here,” said Fox Home Entertainment prexy Mike Dunn. “The DVD consumer is gradually becoming more film literate, and it’s a broad market with people buying all sorts of different things.”

Fox is expected to see even rosier results in the second half as its biggest theatrical releases of the year come to DVD, including the already announced “Robots” and “Fever Pitch” and anticipated releases of “Star Wars: Episode III — Revenge of the Sith,” “Mr. & Mrs. Smith” and “Fantastic Four,” as well as more sets of popular TV series such as “The Simpsons” and the straight-to-DVD movie version of “Family Guy Presents Stewie Griffin: The Untold Story.”

Paramount’s first half under new studio chief Brad Grey also went well for incumbent studio DVD chief Thomas Lesinski, who now reports directly to Grey. The studio showed a top 33% gain over last year to $1.1 billion in revenue, primarily boosted by the increasing number of TV DVDs, mostly from sister cable nets such as Comedy Central.

Four of top 15

Par had four of the top 15 TV DVD titles, including the second season of “Chappelle’s Show,” which more than doubled the next biggest TV title with more than $60 million. First season of the series collected another $13 million this year to bring total revenue on that title to nearly $70 million.

Though solid performers, Paramount’s top two theatrical releases on DVD, 15th-ranked “Lemony Snicket’s A Series of Unfortunate Events” ($102 million) and “SpongeBob SquarePants the Movie” ($82 million) failed to match their box office take.

Market leaders Warner and Disney saw slight revenue declines in the first half, while Universal gained nearly 5%, led by its distribution of DreamWorks’ “Shark Tale” ($195 million), its own fourth-ranked “Meet the Fockers” ($183 million) and its overperforming fifth-ranked “Ray” ($169 million) and ninth-ranked “Friday Night Lights” ($117 million). “Fockers” is also the top rental title of the year so far with $58 million.

“We’re capitalizing on everything,” said Universal Home Entertainment prexy Craig Kornblau. “You can’t just focus on TV or good publicity. It’s really important to pick the right date, to be very strategic and make sure every aspect of the marketing campaign counts.”

Rental market down

The overall rental market was down another 2.3% in the first half to $3.99 billion, though nearly identical by itself to the total box office gross in the same period. Homevideo sales generated another $7.4 billion, up 2.5% during the period.

Despite its essentially flat performance, Disney had the two top moneymakers and three of the top 10. It mopped up nearly $100 million from four straight-to-DVD movies, led by two new titles, “Mulan 2” and “Tarzan 2.”

Warner had four of the top 20 titles, led by New Line’s sixth-ranked “The Notebook” ($147 million) and its own seventh-ranked “Troy” ($145 million), plus four of the top 10 TV DVD titles, mostly from HBO, with recent seasons of “The Sopranos,” “Friends,” “Sex and the City” and the debut of “Deadwood.”

Warner Home Video president Jim Cardwell said it’s become harder to predict how certain titles will perform on DVD because of increased competition from TV shows and catalog titles. “There’s less consistency in the marketplace,” he said.

Sony’s woes

The studio suffering the most in the first half was Sony. It fell from near third last year to distant fifth in market share this year on a 20% decline in revenue to $1.24 billion; Sony also absorbed MGM, which itself dropped nearly 27% to a near tie with Lions Gate at $455 million. Sony had five of the top 20 moneymakers at this point last year but has only one this year, the recently released 10th-ranked “Hitch” ($112 million).

Although the studio has released many TV DVD titles, only one series — three different season sets of “Seinfeld” — ranks among the top 25. This year’s fourth season has generated more than $25 million, while the first two sets initially released in 2004 collectively generated another $22 million this year, bringing total spending on the first three sets to approximately $200 million.

Lions Gate, now in the second year of its merger with Artisan Entertainment, maintained its 3.9% share of the market with the help of some of its best DVD sellers ever, including “Saw” and “Diary of a Mad Black Woman.”

(Jennifer Netherby is a reporter for Daily Variety sister publication DVD Exclusive.)

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