It’s going to take another year — at least — before the home entertainment biz swings back into growth.
So predicted homevid toppers at a Friday event designed to showcase high-def media. Execs forecast that Blu-ray will begin to offset DVD declines by late 2009 or 2010, with digital downloads helping to reverse the sector’s sagging fortunes as early as next year.
The biz, which posted its first substantial spending decline last year, had hoped for a turnaround by the end of this year but hit a rough patch in the third quarter and is now grappling with fallout from the worsening economy.
The sector has been recession proof in the past and has escaped serious fallout so far, but given the severity of the downturn, “to some extent all bets are off,” Walt Disney Home Entertainment prexy Bob Chapek conceded during a roundtable sesh moderated by Daily Variety publisher Neil Stiles.
“The biggest unknown is how the economy will affect us,” said Warner Home Video prexy Ron Sanders, pointing out that the biz has never before weathered a downturn at a time when the dominant format was in decline.
A number of the summer’s box office hits have arrived on disc since the economy worsened, with uneven results, but the biggest are yet to come.
“Wall-E” arrives this week, followed by “Wanted,” “The Dark Knight” and “Mamma Mia!” next month.
“The Dark Knight” is expected to be the biggest hit on disc, outselling “Iron Man” on Blu-ray and potentially goosing hardware sales the way “The Matrix” did early in the DVD era. But late-year hits may not be enough to make up for earlier-year sales declines: At the event, sponsor Digital Entertainment Group projected a 3%-4% decline in overall homevid sales worldwide this year and a 6% drop in DVD sales. Studios now forecast around $750 million in Blu-ray sales, down from projections of $1 billion in the giddy days after the high-def format war ended.
(Blu-ray sales have hit $500 million with the last big push to go; through September, domestic homevid sales were down 3.5% to $8.58 billion, according to Daily Variety sister publication Video Business.) Panelists’ forecasts for 2009 varied, ranging from flat, with digital downloads added in, to slight growth by year’s end. They predicted even healthier results the following year.
“Toward the end of 2010 is when you’ll see us start to get back in the growth business,” said Sony Home Entertainment prexy David Bishop, whose parent company has an added reason to hope for the success of Blu-ray as developer of the format.
Several studio execs cited strong Blu-ray sales of certain titles as signs of the format’s capacity to thrive during an economic downturn, and Paramount Home Entertainment topper Kelley Avery argued that the affordable cost of DVD would serve the industry well during the downturn. Lower prices for Blu-ray players are expected to drive further sales over the holidays, but it’s not yet clear whether prices will be low enough to drive massive sales given the challenging retail climate.
The biz also expects to benefit from a surge in purchases of HDTV sets before the digital conversion in February; these sets, required to operate Blu-ray players, could fuel greater passion for high-def media, the DEG suggested in a study presented at the sesh. However, the study, conducted in September and October, did not probe how the downturn would affect consumption patterns.
For now, execs take heart in the purchases of catalog titles on Blu-ray and in surveys indicating encouraging consumer intent to buy players.
“The table is set for a great future,” enthused Fox Home Entertainment prexy Mike Dunn. “Now might be unclear, but the future is set.”