NYT: For Home Entertainment Releases, a Rare Bright Spot

  • For Home Entertainment Releases, a Rare Bright Spot

    By MICHAEL CIEPLY

    Published: October 30, 2011

    LOS ANGELES — Hollywood’s troubled home entertainment business is moving in an unaccustomed direction: Up.

    Consumer spending on discs and on-demand releases  like “Transformers: Dark of the Moon” was up in the quarter year over year.

    On Monday, the Digital Entertainment Group, which monitors consumer spending for home entertainment in the United States, is expected to report a 5 percent increase in industrywide revenue for the third quarter, to roughly $3.9 billion from about $3.7 billion a year earlier. It is the first quarterly uptick since the beginning of 2008.

    In part, the increase reflects a surge in Blu-ray sales, which are expected to reach $1.23 billion for the first three quarters, up from about $1 billion for the same period a year earlier. That puts them on a par with video store rentals, which have been falling, and on-demand revenue, which has grown more slowly.

    The overall gain is modest, but welcome in a business in which piracy, economic weakness and digital competition have steadily eroded what was once Hollywood’s core source of income — the rental and sale of DVDs.

    “It’s extremely encouraging,” said Ronald J. Sanders, the president of Warner Home Video. “I would say things have stabilized.”

    The numbers reflect an effort to nudge the consumer away from cheap rentals toward high-yield transactions like Blu-ray sales —and may also signal a boost from a slowly improving economy. “I get a guarded sense of optimism from just about every retailer I speak to,” said David Bishop, the Sony Pictures Home Entertainment president.

    By last year, spending on movies and television programs via discs, video-on-demand and other forms of delivery had fallen to $18.8 billion, down 13.8 percent from its 2004 peak of $21.8 billion. Adjusted for inflation, the drop was almost 26 percent.

    Box-office ticket sales in America rose about 12 percent in the same period, to $10.6 billion from $9.45 billion. But half of that is kept by theater owners, and it was not enough to lift the gloom on the home viewing side.

    But the third quarter this year was helped by the home release of strong titles like “Transformers: Dark of the Moon,” “Thor,” and “X-Men: First Class.” And comparisons were easier than in the first half, when new pictures were measured against the colossal video sales for “Avatar,” which was released to home markets in April 2010.

    Though “Avatar” skewed the basis for comparisons, it also laid the groundwork for the current spurt, because it drew consumers toward the Blu-ray format, with Blu-ray sales of the movie reaching 11 million units globally. “It took Blu-ray to another level,” said Mike Dunn, Fox’s home entertainment president.

    The number of homes with Blu-ray players rose 52 percent from a year ago, to 33.5 million in the United States. That rise helped sales for “Star Wars: The Complete Saga,” another strong entry in the last quarter.

    Blu-ray is important to Hollywood, because each sale yields far more revenue than does a low-cost rental from a kiosk or from Netflix. In a sign that consumers are migrating upstream, the sale of Blu-ray discs is expected to top $423 million for the third quarter, surpassing the total revenue from kiosk rentals, at about $414 million. A year ago, that situation was reversed, with kiosks hauling in substantially more than Blu-ray.

    Subscription rentals of physical discs — the Netflix mailer model — rose about 5 percent in the quarter, according to preliminary numbers, to about $607 million from $579 million a year earlier. Meanwhile, an increase in subscription streaming — again, the Netflix model — as well as electronic sales via iTunes and other sources, and video-on-demand, pushed overall digital delivery up more than 50 percent, to roughly $812 million.

    That more than offset a 15 percent decline in regular DVD sales, to about $1.3 billion from $1.55 billion.

    A pocket of strength, noted Mr. Sanders of Warner, was video-on-demand, which took in $420 million for the quarter, jumping ahead of video stores.

    Studios have been timing the availability of films to nudge viewers toward favored formats. Warner, for instance, has been withholding pictures from kiosk rentals and Netflix until 28 days after they are available in video stores, and recently tried to keep films like “Horrible Bosses” and “The Green Lantern” from being available as rentals even in video stores until they had been on sale for a month. (Blockbuster bypassed Warner and buying rental stock on the open market).

    In another attempt to nudge consumers toward sales instead of rentals, some studios offer “UltraViolet,” a technology that lets purchasers keep a film in a digital locker, for use on many devices. The hope is that consumers will build collections.

    For the year so far, overall spending on home entertainment is still down about 2 percent, from $12.5 billion to about $12.3 billion for the first three quarters.

    Mr. Sanders said he doubted the recent upturn would be enough to deliver what the industry hasn’t had since 2004 — a year of growth. “I think we’re going to be pretty close to where we are right now,” he said.

    But Mr. Dunn is not so sure. With Warner’s “Harry Potter and the Deathly Hallows: Part 2” and Fox’s “Rise of the Planet of the Apes” on the way, he is optimistic.

    “A week in December is worth a month,” he said.


    October 31st, 2011 | jwilka |

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