VHS: Not Dead Yet

In the era of DVD, videotape gets no respect—some might say deservedly so. But according to the Video Software Dealers Association (VSDA) VidTrac program, considered by some to be the most accurate video rental point-of-sale tracking technology, the 2001 year-end rental revenue market share for VHS was 83.4% while DVD accounted for 16.6%. This variance means that VHS rental spending outpaced that for DVDs by $5.6 billion.

"Contrary to reports of its demise, and despite the flurry of DVD activity at the retail rental and sales level, the VHS format continues to be the rental choice of consumers by a margin of almost three-to-one, and will continue to co-exist with DVD in American households for years to come," says the VSDA's Bo Andersen.

Andersen continues, "VHS is by no means dead and it is not dying. While DVD is a phenomenal gift—to both consumers and the home video entertainment industry—VHS and VCRs are not going to disappear." Andersen did note that DVD is increasing its share of the home video market, but that the market is growing overall. "Currently the industry is gaining three DVD rentals for each lost VHS rental."

According to VSDA numbers, the 2002 year-to-date video rental market (in the 11 week period spanning January 6 to March 17) demonstrates a significant gain for DVD rental revenue, which rose 12 percentage points to 28.9% of the overall market. The 2002 year-to-date numbers show consumers have spent $542 million renting DVDs (172 million rentals) and $1.32 billion on VHS (500 million rentals).

The VSDA notes that the relative strength of VHS is not solely a function of older catalog titles released only on VHS. "VHS is almost as dominant in the new-release rental market as it is in the overall video rental market. So far this year, VHS has captured 68% of the new release rental markets by revenue."

The numbers reveal that the one area where DVD is the leading format is in video sales, but not by much. Looking at national video purchasing in 2001, consumers spent $5.4 billion purchasing DVDs (52%) and $4.9 billion on VHS cassettes (48%). According to Jerilyn Kessel of the research firm Centris, "We are watching DVD grow tremendously, both in hardware sales as well as software sales and rentals. VHS is declining, but still generating a lot of consumer activity. Even 57% of DVD owners rented a VHS tape. VHS may be slowing down, but it definitely is a medium that matters!"

"At the moment, DVD players exist in one out of every four households," said VSDA's Andersen. "I estimate we will reach a 50% penetration of DVD in American households by late 2004, and yet I still envision a VHS player in almost every one of those households."