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U.S. Home Entertainment Spending Flat in First Half of 2014

U.S. consumer spending in the first half of the year was essentially flat with last year, but the shift toward digital distribution is becoming increasingly pronounced.

Numbers released this morning by DEG: The Digital Entertainment Group show a robust second quarter, in which total consumer spending on home entertainment rose 2%, making up virtually the entire 3.2% deficit from the first quarter.

Total home entertainment spending for the first six months of 2014 came in at an estimated $8.58 billion, down less than 1% from the $8.65 billion consumers spent in the first half of 2013.

As expected, disc sales continued to fall, with consumer spending on Blu-ray Disc and DVD purchases in the first six months of 2014 down 8.2%, to $3.26 billion from $3.56 billion in the first half of 2013. But observers say that’s largely a function of a continued drop in price, with Home Media Magazine market research showing the number of discs sold to consumers in the first six months of the year is actually up by more than 2%.

Electronic sellthrough, or Digital HD — buoyed by the growing practice among studios to let consumers buy digital versions of hot new movies two weeks ahead of their disc availability — rose 37% in the first half of 2014, coming in at an estimated $671.4 million, compared to just $490.6 million in the first six months of 2013.

Those gains were enough to lift the entire sellthrough category to $3.93 billion, down just 2.8% from the $4.05 billion consumers spent on home entertainment purchases in the first six months of 2013.

The DEG also notes that Blu-ray Disc sales rose 10% in the second quarter alone, suggesting continued viability in the physical disc business many in the mainstream media have given up for dead. In fact, EST represented just 20.5% of packaged media sellthrough.

Consumer spending on subscription video-on-demand — such as Netflix streaming — rose more than 26% in the first half of 2014, to $1.91 billion from $1.51 billion in the year-ago half.

Total digital spending — on subscription VOD, a la carte VOD and EST — rose 16.7% to an estimated $3.6 billion from $3.09 billion, DEG numbers show.

On the rental side of the business, traditional disc rental at brick-and-mortar video stores continued its freefall, falling nearly 37% in the first half of the year to an estimated $346.8 million from $515.2 million in the first six months of 2013.

Disc rentals at kiosks, a business segment dominated by Redbox vending machines, slipped just 3.1%, by comparison, to an estimated $925 million, from $955 million a year ago.

Thomas K. Arnold is editorial director of Home Media Magazine, http://www.homemediamagazine.com.

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