DVD Sales Energize Home Video Market

""Media Of The Millennium"" Growing In Popularity

24-Apr-00

While Walt Disney was king of the home video market last year, Time Warner was the DVD leader. And DVDs perked up otherwise flat sales, according to a recent report by Adams Media Research. Overall, the home video industry, with rentals and purchases, had revenue of $19.4 billion, a 4.3 percent increase from 1998. Last year, Disney's Buena Vista Home Entertainment had the industry's two best-selling videos, ""A Bug's Life"" and ""Mulan."" Its revenue accounted for about 30 percent of the market. Warner Bros. was second, with about 19 percent. Disney also brought in the most revenue from rentals, according to the Carmel Valley, California-based entertainment-consulting firm. But among DVD movie sales, Warner Bros. eclipsed Disney. Thanks in large part to top-selling DVD flick ""The Matrix,"" Warner had 30 percent of the DVD market. DVD movie sales jumped to $1.5 billion in 1999, up from $416 million in 1998. Sales are expected to hit $3.1 billion this year and $6.3 billion by 2002 - surpassing VHS movie sales of $4.8 billion, according to the report. Since its 1997 introduction, DVD technology has gained on VHS and VCRs. DVD players use CD-size discs to play full-length movies with sharp video and dynamic sound. The players, which start at about $170, are expected to be in 10 million homes by year's end, up from 4.6 million in 1999. By 2002, DVD households are expected to grow to 25 million, the report says. ''It's the media of the millennium,'' says Warren Lieberfarb, President of Warner Home Video. ''It is at this moment driving the electronics business and driving the growth of Hollywood.'' Consumers are buying more DVD movies than VHS-format flicks. According to the report, consumers purchased an average of 22 DVD movies last year while VCR owners bought about six VHS movies. And the surge occurred even though DVD movies cost an average of $23 vs. $12 for VHS. ''The handwriting is on the wall. Because the consumption levels are higher and prices are higher, we expect it to really take over the video market,'' says Tom Adams, President of Adams Media. The biggest surprise last year was what drove DVD sales. Most insiders thought DVD movie sales would be largely confined to replacement movies: VHS movie owners replacing their older titles with DVD-format movies the way music lovers replaced albums and tapes with CDs. Instead, new DVD film sales made up about half of overall sales and have kept pace with older movies released in DVD format. ''It clearly had a major impact on the market in terms of causing some growth'' in an otherwise down year, Adams says. Video revenue is important to movie studios because videos represent more than half of a film's overall revenue. Among rentals, VHS still dominates. Last year, some 36.6 billion VHS videos were rented at video stores. That was flat with 1998. But DVD movie rentals increased to 31.7 million, up from 6.4 million in 1998. Witnessing the growth of DVD, several companies, including Blockbuster Video and Disney, have shifted their focus to include more DVD products. Disney's DVD movie sales could grow this year as a result of the release of ""The Sixth Sense"" and ""Toy Story 2."" Disney also began releasing 26 of its classic animated titles, such as ""Snow White"" and ""Bambi,"" on DVD.Source: USA Today