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Tuesday, June 16, 2009
Blu-ray Unable to Halt DVD Sales Slump Despite four-fold Increase in BD Spend

A four-fold sales increase of Blu-ray movies as well as the double digit disc sales increases in China, Russia and India helped mitigate the ongoing global DVD sales slump in 2008, according to a new report from Screen Digest.

The global video business lost more than $2.6bn in 2008 due to a combination of a fall in both DVD purchase and rentals by consumers. The figure, which equates to a downturn of 4.8 percent globally, is published in the latest report from Screen Digest. Whilst the decline in North American DVD sales is well documented, the decline in international markets (global excluding North America) has received less coverage.

Internationally last year consumers spent $26.4bn on video software, with two thirds of that figure ($18.1bn) spent on buying DVD discs. The overall figure represents a 3.6% drop on 2007 spend and a 4.7% drop on disc sales alone. The sales figures are in line with the overall trend which saw consumer spending plateau between 2004 and 2007 and the North American market starting to decline in 2007 which signalled the start of a global downward trend.

The high definition Blu-ray format was heralded by the industry as the answer to the decline of DVD. However the format war with Toshiba's HD DVD meant that the strong unified marketing that had worked so successfully for DVD's launch a decade earlier was not replicated. This coupled with a worldwide recession in consumer spending and the easy availability of video via other means such as downloading, pirate, legal and illegal temporary ownership, ensured that despite strong sales of BD in 2008 of $482, they barely made a dent in the missing revenue.

Physical rental continues to decline

This market is coming under pressure from many sides, including ever-cheaper disc sales, piracy, downloading and legal and illegal temporary ownership. As mass market rental chains adopt ever more aggressive pricing strategies to keep customers, online rental services such as LoveFilm International in Europe and Quickflix in Australia have helped ease the decline of physical rental, however online rental is not effective in all markets.

The chart above shows the top ten international markets for growth in video spending. However outside of this ranking lie three countries that experienced double-digit growth in consumer spend in 2008 ? China, India and Russia. At present their combined spend accounts for only 4 percent of the international total ($979m) therefore placing the combined countries just ahead of Italy in international rankings. Whilst this is small, the markets have attracted the eye of the Hollywood Studios as a result of their performance.

Helen Davis Jayalath, Senior Analyst at Screen Digest says "We expect Blu-ray to account for 6.9% of international video spending this year ? assuming there is strong promotional activity. However, despite consumers' interest in the high definition format and demand for packaged media, the current challenging economic climate means that we don't expect BD to be driving even minimal sector growth until 2010."

According to another report from the NDP Group, US BD player sales increased 72 percent in the first quarter of 2009 compared with the same period last year.

The growth in unit sales took the number of players sold in the first three months of the year to 400,000. Although there was a dramatic increase in the total volume of sales, revenue increased by a more modest 14 percent.

NPD also found that Blu-ray awareness in the US had surpassed 90 percent in the past six months.

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