DEG RELEASES FIRST QUARTER HOME ENTERTAINMENT RESULTS

Blu-ray Disc Sales Are Up More than 100 Percent

July 16, 2009

DEG: The Digital Entertainment Group released first quarter U.S. sales figures for the home entertainment industry today. Consumer spending for the first quarter 2009 in the home entertainment window for pre-recorded entertainment, which includes DVD, Blu-ray Disc and digital distribution, was $5.3 billion, off by five percent compared to the same period last year. The home entertainment window’s net contribution to the studios was down less than four percent for the quarter. The DEG compiles quarterly sales data for various products within the home entertainment category, including Blu-ray, DVD and HDTV. The industry association compiles its data based on input from member companies, retailers and industry association tracking sources. The DEG announced that, while consumer spending was down in the first quarter of 2009, the number of consumer transactions remained constant at 898 million (flat against the previous year), underscoring that the demand for home entertainment remains high. The home entertainment sector has remained remarkably resilient, particularly with first quarter growth of Blu-ray up 105 percent to $230 million and digital distribution up 19 percent to $487 million for the period. The Hollywood-based trade group also noted that the Easter holiday often sees a spike in gift buying, which was in March in 2008, was not in first quarter this year. “People are choosing new ways to consume entertainment, but there is no clear evidence of a long-term change in consumer behavior,” said Ron Sanders, President, DEG and President, Warner Home Video. “What we are very likely seeing here is an understandable consumer reaction to the difficult financial times in which we find ourselves.” While no business is immune to these challenging market conditions, higher margin businesses like Blu-ray and digital distribution are providing an increased overall contribution from pre-recorded home entertainment. Although sell through of standard DVD was down 14 percent to $2.89 billion in the first quarter, as stated Blu-ray was up 105 percent and digital distribution was up 19 percent for the same period. Rental transactions and spending for DVD and Blu-ray were up one percent for the first quarter. When looking at year-to-date, combined Blu-ray Disc and DVD revenue was off nine percent to $3.35 billion. In an environment where the U.S. Department of Commerce reported a downturn in all retail and food services businesses of 9.4 percent for March 2009 over March 2008, the home entertainment window remains quite stable, down less than four percent over the course of the entire year from first quarter 2008 to first quarter 2009. “When considering that this all has been achieved in the worst recession ever, it is clear that home entertainment’s stability is fueled by Blu-ray’s popularity,” said Bob Chapek, Chairman, DEG and President, Walt Disney Studios Home Entertainment. “Blu-ray’s tremendous performance can be attributed to its unsurpassed picture and sound quality. Moreover, we remain confident that demand for Blu-ray will continue to grow given that it is a revolutionary platform.” BLU-RAY DISC SALES According to figures compiled by the DEG with input from content providers and retailers, Blu-ray Disc sales were hugely popular at retail with sales up some 105 percent. According to figures compiled by Swicker & Associates on behalf of the DEG, nearly 20 million Blu-ray discs shipped to retail in the first quarter of the year – a growth of 108 percent over the same period last year. Sales of all Blu-ray compatible devices, including set-top players, PC drives and PlayStation 3 consoles are now in more than 10.5 million U.S. homes.

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