Audio Video News

Sales and rentals of digital video discs (DVDs) are exploding this year and will lead to a resurgence of growth for the overall retail movie market in the decade to come, according to a series of reports prepared by Adams Media Research (AMR), and published in the bi-weekly Hollywood Aftermarket newsletter. The report adds that, after just three years on the market, DVD players are on track to penetrate 12% of US homes by the end of this year, making this the fastest rollout of a consumer entertainment technology since black-and-white television in the 1940s.

Further, the report finds that those early-adopting homes will spend a staggering $4.7 billion renting and buying discs in 2000, up from $1.6 billion last year. AMR projects that overall video rentals (DVD discs and VHS tapes combined), which was $10 billion in 1999, will jump to $13.6 billion by 2005. In the same time period, video sales, which were $9.2 billion in 1999, will more than double, to $19.2 billion. By 2005, 61% of video rentals and 74% of video sales will come from DVD.

AMR's Tom Adams adds that "reports of the demise of the packaged movie market have been exaggerated. Digital networks have been threatening to 'replace the trip to the video store' for nearly a decade now, and by the end of this year nearly 20% of US homes will have digital DBS or cable with near-video-on-demand movie service. Yet despite the increased competition and a rather weak slate of films coming to video in recent months, the rental market should grow modestly this year, and sales are on track to explode more than 20%.

"Clearly the retail and networked forms of in-home film exploitation are now in an era of greater competition with each other. But rather than cannibalizing each other, the competitors are forcing each other to better serve consumers, and that's expanding the whole market. The two big winners in all this are consumers and the movie studios, who stand to see major incremental gains in overall revenue.

"But the biggest phenomenon is DVD. According to ongoing activity tracking by our consumer research partner Centris, in the typical month of first-half 1999, 57% of DVD homes bought an average of nearly five discs, while over half of DVD homes were active renters, taking home a monthly average of over five discs. That's a recipe for resurgent growth in both sales and rentals as DVD penetration soars from 12% at the end of this year to 53% of homes by 2005. Ultimately, the impact of the digital disc on the video industry is likely to be more profound than that of the audio CD on the music industry. In the audio market, unit sales doubled in the 10 years after the new format's launch."

The next new technology likely to bring incremental growth to the studios, according to AMR, is true video-on-demand, an electronic delivery format through which cable companies and telephone companies will be able to serve up particular movies to individual consumer homes whenever they are ordered. According to Adams, "True VOD has many advantages for consumers. It is just emerging from the labs via cable systems and Internet-based models such as the recently announced Blockbuster DSL service. As it begins to reach wide deployment in the 2005 era, it should grow into a substantial portion of cable's movie revenue stream, and provide the core of a whole new movie market delivered via the telephone-company infrastructure."