<span>Spending dips, but future bright</span>

Studios optimistic that market has stabilized

APRIL 24 | With no blockbuster releases the size of last year’s The Incredibles, from Buena Vista Home Entertainment, consumer spending on home video purchases and rentals combined slipped about 3% to $5.9 billion during the first quarter, according to Video Business research.

After a volatile 2005, home video execs said the market has stabilized and blamed the downturn in the quarter on a second-quarter Easter (last year the holiday fell in March) and no early release as big as The Incredibles, which was the top-selling disc last year.

“Some of the disappointment we had through the summer and through the early fall faded away, and now we’re back to strength,” said Universal Studios Home Entertainment president Craig Kornblau.

Buena Vista president Bob Chapek called the market resilient and said he was particularly happy with sales on non-theatrical releases. “They’ve been surprisingly strong for us,” he said.

“Overall for us, we’re just exceptionally pleased with the current marketplace,” Paramount Home Entertainment worldwide president Kelley Avery said.

Consumers spent $3.8 billion buying DVDs and VHS tapes, a 4% drop from the comparable 2005 period. The waning VHS format continued to skew the numbers, however: DVD sales were off only 1% to 2%, according to most studios, but VHS’s drop, estimated by studios at 60% to 75%, pulled year-to-year comparisons down further.

Rental spending on both formats slipped 1.9% to $2.12 billion, according to Rentrak’s Home Video Essentials (VB, 4-17).

Warner Home Video held its comfortable market share lead (21.5%) with $1.27 billion in overall consumer spending. The studio’s Harry Potter and the Goblet of Fire was the top seller of the first quarter, and Warner-distributed Wedding Crashers, from sister company New Line Home Entertainment, was No. 2.

Universal swept into second place in market share during the quarter with a 17.5% share or $1 billion in consumer spending. Universal’s numbers include spending on DreamWorks Home Entertainment titles, which were handled through the studio during the quarter but will shift to Paramount Home Entertainment, in the second quarter.

King Kong led sales in the first quarter for Universal and was the No. 4 title in the period despite being in stores less than a week.

Sony Pictures Home Entertainment, which includes MGM, was No. 3 in market share with healthy sales on Memoirs of a Geisha, Capote and The Legend of Zorro and a strong rental showing. Sony also said it saw robust 32% TV sales growth led by I Dream of Jeannie.

But the studio, like every other, is facing increased price pressure on catalog releases with few gems unreleased on DVD at this point.

“The market has moved to heavy promotional activity when it comes to catalog,” said David Bishop, president of Sony Pictures Home Entertainment North America. “There are fewer and fewer single event catalog titles out in the marketplace, there are still some, but not like two to three years ago. To a large degree, catalog is an impulse item.”

20th Century Fox Home Entertainment president Mike Dunn predicted a “bare knuckle alley brawl on catalog this year.”

Still, the studio saw strong catalog sales on Ice Age, with a Super Cool Edition released timed to the theatrical debut of Ice Age 2, and a new special edition of 9 to 5, for which the studio mounted a star-studded campaign with stars Dolly Parton, Jane Fonda and Lily Tomlin.

Fox’s Oscar-winning Walk the Line was the No. 3 seller, with particularly strong sales in rural areas, Dunn said. That along with sales of Transporter 2 and In Her Shoes helped the studio hold its market share.

With no superhero releases, Buena Vista fell to fourth place with a 13% share of the market. The studio nonetheless had four titles in the Top 10: new releases Chicken Little and Flightplan, special re-issue Lady and the Tramp and DVD premiere Bambi II.

Paramount Home Entertainment continued to see strong sales on its TV and non-theatrical children’s product, which helped drive spending.

Robust sales of Lord of War, Saw II and Oscar-winner Crash—the quarter’s No. 1 catalog seller—helped Lionsgate make huge gains in market share. The studio had 6.8% of the market in the quarter, up from about 4% the previous year. Even so, president Steve Beeks said the market is still hard to predict, and the studio has been conservative with its shipments to avoid return issues, which plagued the industry last year.

“The good news is there were no negative surprises,” Beeks said. “Our products performed like we thought they would.”

New Line executive VP of marketing Matt Lasorsa was more optimistic, saying the studio’s top performers—Wedding Crashers, Domino and The History of Violence—all outperformed initial expectations.

“We sold through initial shipments quickly,” he said. “We’re very happy.”