OCT. 22 | Consumer spending on home entertainment sales and rentals continued below 2006 levels during the third quarter, but pulled to 3.5% below the year-earlier period, closing a gap that was 4.8% at the mid-year point. Optimistic studio execs say that’s close enough to pull even with 2006 by year’s end, given the bonanza of box-office hits slated in the fourth quarter.

Year-to-date sales of all formats through Sept. 30 were off 4.5%, slipping to $8.9 billion.

Rentals, meanwhile, trail 2006 by 2.8%, at $5.7 billion through the third quarter. (See the Top 20 renters.)

The biggest titles released in the quarter were Warner Home Video’s 300, Walt Disney Studios Home Entertainment’s Wild Hogs and Bridge to Terabithia and Universal Studios Home Entertainment’s Knocked Up, which came out Sept. 25.

“There weren’t as many releases in general in the third quarter, and consumers are picky and are waiting for the great titles to come along before spending their money,” said Lori MacPherson, Disney’s senior VP and general manager for North America. “All of the box office for the year happened during the summer, so the release schedule for DVD is really happening in fourth quarter. The industry is down now, but the fourth quarter is big enough to pull us out of that.”

  Disney anticipates consumer spending on DVD new releases in the fourth quarter will rise 15% over the final quarter of 2006.

The combined box-office gross of titles hitting DVD in the fourth quarter is $4.1 billion, up almost 10% from $3.7 billion in 2006, according to studio estimates. That includes a record four films that made more than $300 million—Pirates of the Caribbean: At World’s End, Spider-Man 3, Shrek the Third and Transformers—and 15 more titles over $100 million.

“I think this is the biggest fourth quarter we’ve seen coming to video,” Warner president Ron Sanders said. “But retail needs to be able to execute the number of titles coming to the marketplace. We’re confident the consumer will shop, but one of the worries is that you just can’t maximize every title with the given shelf space.”

Warner’s Harry Potter and the Order of the Phoenix, for instance, lands on the same Dec. 11 date as Disney’s High School Musical 2 and Universal’s The Bourne Ultimatum. That follows Disney’s Pirates: At World’s End and Sony’s Superbad on Dec. 4.

“There is a fine line between not having enough titles [as in third quarter] and then having too many,” agreed Simon Swart, 20th Century Fox Home Entertainment executive VP and general manager. “Some of the smaller titles could get lost in the shuffle.”

But many studios think they can beat the clutter blues because of the franchise power of their releases and by releasing multiple configurations.

In the case of Potter, Warner also will be bowing a gift set holding the first five films, as well as its first interactive DVD game, featuring the boy wizard. Ocean’s 13 will usher in Blu-ray Disc, HD DVD and standard-definition packs, each of which will hold all three films in the franchise.

Sony will be rolling out six SKUs of Spider-Man 3, including a gift pack filled with all three installments.

“It certainly will get us multiple placements throughout the store,” said Bishop. “You’ll end up being in the section where they carry Blu-ray and also will be a permanent fixture through the end of the fourth quarter with the gift set.”

Also, high-definition will become a real studio business for the first time this fourth quarter, many execs predict. From the beginning of the year through the third quarter, consumer spending on purchases of HD DVD and Blu-ray titles was about $120 million, according to multiple studio estimates.

Lionsgate executive VP and general manager Ron Schwartz bullishly estimates that will grow to $390 million in Blu-ray and HD DVD spending across studios, mirroring the comparable period during DVD’s second year.

The Bourne Identity will be by far our most significant shipment of HD DVD to retail,” said Craig Kornblau, Universal Studios Home Entertainment president. “The sky is not falling; in fact, we are wildly optimistic that this fourth quarter will yield exceptional results.”

The third quarter did have some high points, as relatively light studio release slates allowed titles that did launch with time to establish themselves on shelves.

  • 300 was a milestone title for Warner, with its Blu-ray and HD DVD versions selling 250,000 units combined during street week, crowning the film the best-performing high-def title to date. 300 speared $117 million in sales across all formats, Warner execs said.
  •  Universal achieved a studio best with its first season of TV hit Heroes, whichrelease sold 700,000 units in the quarter to become the studio’s top TV on DVD performer to date. Also, Universal execs said season three of The Office is outselling its second season by 70%.
  • Despite the loss of the MGM catalog to Fox, Sony Pictures Home Entertainment said it beefed up its catalog market share by more than 5 percentage points.
  • On average, Lionsgate titles Pride, The Condemned and Delta Farce out-earned their respective box-office grosses by five times, and Fox’s $10 million-grossing Pathfinder sold like a $40 million film, said studio executives.

“We scheduled these films at the right time so they could find an audience,” Lionsgate’s Schwartz said. “I think we accomplished that goal.”

2007 Q3 Top Renters


Title (Label/Distributor)

Street Date


The Pursuit of Happyness (Sony)

March 27


The Departed (Warner)

Feb. 13


Blood Diamond (Warner)

March 20


Night at the Museum (Fox)

April 24


The Guardian (Disney)

Jan. 23


Déjà vu (Disney)

April 24


Shooter (Paramount)

June 26


The Illusionist (Fox)

Jan. 9


Casino Royale (Sony)

March 13


The Holiday (Sony)

March 13


Ghost Rider (Sony)

June 12


Wild Hogs (Disney)

Aug. 14


The Good Shepherd (Disney)

April 3


Premonition (2007, Sony)

July 17


The Prestige (Disney)

Feb. 20


Man of the Year (Universal)

Feb. 20


Stranger than Fiction (Sony)

Feb. 27


Crank (Lionsgate)

Jan. 9


Norbit (Paramount)

June 5


Little Miss Sunshine (Fox)

Dec. 19, 2006

Source: VB research