Has the DVD format peaked?

The latest worry out of Hollywood:

"Thanks to saturation and advances in technology, the DVD is dying. Although movie revenues are expected to be up 5 percent and a strong slate of franchise films is set for release in ’07, the most lucrative part of the movie business is flat-lining.

And a few developments last week threaten to not only accelerate its death but also to take a huge bite out of the movie studios’ bottom lines next year.

According to Nielsen Media Research, DVD players overtook VCRs in U.S. households for the first time this year (2006) – they’re now in some 92 million homes.

Taken together, Pali Research analyst Richard Greenfield is predicting that 2007 will mark the first year that consumer spending on DVDs declines domestically, which, in turn, is going to put a serious strain on movie studio profits. ‘We suspect the risk to 2007 film industry profits is increasingly to the downside,’ Greenfield wrote in a recent report.

Though the $23.4 billion expected to be collected on DVD sales next year trails only 2006 in dollar amount, the 1 percent spending decline that represents is a far cry from the double- and triple-digit growth experienced since 1999.

Weakening fundamentals are a key reason why the studios have openly embraced new distribution technologies like iTunes and why Comcast was able to convince the studios to let it test movies on-demand, day-and-date, with the DVD release."

Interestng stuff . . .


NY Post, December 24, 2006

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  1. Doug commented on Feb 6

    I would be interested to see what the chart looks like for sales of recently produced movies only. From my own personal observations consumers kind of rolled over their movie inventory to DVD’s from VHS which was fed gradually from older movies finally being released on DVD. Perhaps the decline does not yet indicate the death of the format, but rather a return to a more appropriate baseline of consumption of new movies only.

  2. Rick Hanley commented on Feb 6

    Last I heard was that DVD is the big revenue number and ‘free’ TV is the big profit number. Both are very important because you drive for show and putt for dough. One key offset to physical DVD becoming feeble is the massive battle among the cables, satellites, and telco’s. The content owners should enjoy a bonanza for awhile, at least until the shakeout occurs.

  3. Uncle Jack commented on Feb 6

    Perhaps this is more a sign of the consumer peaking than the DVD rolling over.

  4. cm commented on Feb 6

    I’m mostly with Doug; otherwise death of revenue/profit growth does not mean death of the format. We will yet have to see whether HD-DVD will be successfully shoved down people’s throats.

    There is an analogy in audio — the mass-pressed read-only format was the vinyl record, replaced by CD; the recordable magnetic tape reel later replaced by cassettes, now replaced by CD-R and MP3/WMA/WAV-style formats. Plus misc other consumer and professional formats.

    So far, CD/MP3 appear to be good enough for “street” and other unambitious applications, and attempts to initiate conversion to higher-fidelity and more expensive formats have failed to get broad traction.

    That has decidedly not been so for vinyl records, cassette tapes and VHS; they had very noticeable quality limitations and were more prone to certain classes of mechanical damage, not least because they were analog and of more flimsy material. (OTOH heavily scratched public library CDs/DVDs also show problems, but are much more robust than a vinyl disk.)

    I submit that DVD, and DVD-quality streaming formats, are similarly good enough for broad audiences.

  5. Steven Walcott commented on Feb 6

    I’m a huge consumer of audio, but a smaller consumer of video. I think it’s possible Netflix has had an impact on DVD sales. I’m not super motivated to buy any DVD when I can see it with access to the Netflix database.

    I think in both video and music there is a tension between ‘the renting’ mode of consumption and ‘the owning’ mode of consumption.

    I’m not sure that consumers or producers of content know which movies or music they want to own and which they want to rent.

  6. donna commented on Feb 6

    Personally, I’m kinda sick of having to store all this stuff. There are very few movies I actually want to own and watch again, so we Netflix most things. I use itunes for most music I want anymore as well.

  7. num4tdog commented on Feb 7

    Did people say “theater box office has peaked” when it declined 6% from 2004 to 2005? If so, they were wrong, since it increased 4% the following year. And DVD sales are only projected to decline by less than 1% this year (and remember, this is a PROJECTION, done in January, for the entire coming year). Make blockbuster movies, and more people will buy them; don’t make them, and DVD sales will go down. Simple as that.

  8. Tom B commented on Feb 7

    “We will yet have to see whether HD-DVD will be successfully shoved down people’s throats.”

    Blu Ray and HDDVD have real advantages in that they hold more data– though, perhaps, that may make them more error-prone.

    BTW: I’d definaterly bet on Blu Ray in this particular format war. Blu Ray disks are out selling HDDVD 3:1 right now, and there are certainly more Blu Ray drives out there, between PC’s and PS3’s.

  9. Bluzer commented on Feb 7

    “Has the DVD format peaked?”

    That’s a silly question – obviously it hasn’t. The volume of DVDs produced worldwide will continue to increase year-over-year for many more years. Thanks primarily to Asia-ex-Japan- where it is only just begining to take off. So a more appropriate question might be…

    “Has the DVD business peaked”
    No, For the same reason as above. So..

    “Has the DVD business peaked for the US majors”

    On this point – maybe.

    If we’re not precise in our words how can we be precise in our thoughts?
    And if we limit our vision to the US – that would hardly be the “big picture” now, would it?

  10. snarly commented on Feb 7

    Just a bit of anecdotal evidence that seems to back up a few other posts, I am not really adding more DVD’s to my collection until I can upgrade to HD-DVD or Blue ray. There are movies that I feel are classics that i would like to own. ( ie- The Seduction of Mimi) but I do not want to buy them until they are on the new format.

  11. filmy commented on Feb 7

    dvd is just one of many ways to consume a movie
    dowloads,ppv have taken up slack and then some
    what’s the yoy increase for paid movie downloads? a million percent?

  12. Jojo commented on Feb 7

    I’ve never understood why people buy movies. Unless you are studying film making or are a movie historian, once you’ve seen the movie, you know how the thing ends. How many times does the average collector re-watch a movie?

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