DVD Rentals On the Decline

Hollywood’s home entertainment business has been looking over its shoulder for some time now, warily watching the steady decline of the music business, with falling CD sales, legal and illegal downloading and the shuttering of former retail giants like Tower Records. And while DVD rentals have helped bolster Hollywood’s entertainment mix, first quarter data released Thursday (4/15) from movie industry trade organization Digital Entertainment Group shows the DVD market on a similar downhill trajectory, with DVD rental revenue falling 14% from a year ago. The decline is worrisome, considering the fact that DVD sales and rentals account for about half the profit for a movie.

In 2009, in the midst of the recession, consumers tended to rent DVDs rather than purchase them. DVD rental revenue rose 4% for the year, with sales dropping 13%. The Digital Entertainment Group report linked the first-quarter decline to the closure of brick-and-mortar outlets by leading retailers Blockbuster and Movie Gallery, with DVD mail subscription service Netflix and kiosk vendor Redbox accounting for nearly all the rise in rentals. But the overall drop in numbers indicates that the rapid growth of those newer outlets may be slowing.

Blu-ray and digital remain bright spots. Sales of high-definition Blu-ray discs were up 74% and rentals rose 36%. Digital distribution revenue, which included download-to-own and video-on-demand rentals, grew 27%. However, those factors weren’t enough to compensate for the 8% drop in sales and rentals for the quarter. Looking ahead, the trend shows that the coming year could be even tougher for Hollywood than 2009, when total revenue fell 5%.

“We are still facing a challenging environment but are very pleased to see positive indicators of stabilization in our overall business,” says Warner Home Video President Ron Sanders, who heads Digital Entertainment Group.