Overall home-entertainment spend was down in the US last year - but digital distribution and Blu-ray were among the bright spots as the market goes through a period of re-invention. And a look at the UK’s home entertainment sector.
Home entertainment spending in the US was down just over 2% in total over 2011, to around $18bn. But coming after a couple of years of steeper declines, that drop-off was viewed as relatively good news in a sector that has seen consumer spending decreasing for seven straight years from its 2004 high of $21.8bn.
The news was good enough, in fact, for the industry-funded DEG: The Digital Entertainment Group, which recently revealed the figures in its year-end report, to proclaim that in 2011 “Hollywood’s home entertainment recovery continued”.
‘The studios have finally found an online exploitation model that the consumer loves’
Tom Adams, IHS Screen Digest
The details of the report suggest the sector is going through a re-invention as much as a recovery. Traditional revenue streams are drying up. Spending on disc rentals through bricks-and-mortar outlets dived nearly 29% last year to $1.6bn, according to the report, and sell-through spending on physical discs was down more than 13% to $8.9bn.
Growth came from new formats and distribution mechanisms. Sales of Blu-ray format discs were up 20% last year, hitting $2bn for the first time, said the DEG, and Blu-ray penetration jumped 38%. Blu-ray compatible devices, which have become more affordable since the format’s launch in 2006, are now in nearly 40 million US homes.
Spending on disc rentals through self-service kiosks such as Redbox soared 31% to $1.7bn. Low-cost kiosk rentals are, however, a controversial subject for the Hollywood studios, some of which have pushed to make Redbox wait longer for new titles in an attempt to protect more profitable disc sales.
Most impressive was the growth in spending on digitally distributed home entertainment, which rose 51% overall to $3.4bn. Within the digital category, video on demand (VoD) spending was up 7% to $1.9bn. Subscription streaming, included in the DEG report for the first time, accounted for $993.6m and could be on a steep growth curve. “After a decade of experimenting,” says IHS Screen Digest principal analyst Tom Adams, “the studios have finally found an online exploitation model that the consumer loves.”
Electronic sell-through (EST) was up 9% to $553.7m, and though that total is still small, industry observers expect rapid gains in the area in coming years. “We’re at a point right now where that option is becoming more well-known to the consumer,” says Wade Holden, analyst with SNL Kagan, which is projecting that EST will be worth almost $3.6bn by 2021.
Expanding consumer options has become a key strategy for independent and studio distributors as they attempt to spur growth in the home-entertainment sector.
Independents have had some success giving relatively high-profile films early VoD exposure. For example, Lionsgate and Roadside Attractions gave Wall Street drama Margin Call a simultaneous theatrical and VoD release last October. The result has been a box-office take of $5.3m and a reported $4m-plus in VoD revenue.
Studios, meanwhile, are hoping to boost disc sales and EST business through the launch of UltraViolet, a cloud-based storage system that allows consumers who buy a film on disc to watch it on a variety of digital devices.
Though the system has attracted some criticism, its studio backers see a lot of potential. “During the launch of the DVD there was a wave of negative comments, and people said it was a failed format,” Sony Pictures Home Entertainment president David Bishop recently told the Los Angeles Times. “In the end, DVD did extremely well.”
IHS Screen Digest analyst Adams suggests that by expanding consumer options through UltraViolet and other initiatives, the studios are doing the right thing to stimulate new growth in home entertainment. Adams says: “They really have made things available in a very consumer-friendly way, and in lots of different ways, so everyone can consume in the way they find most attractive.”
US home entertainment consumer spending 2010-11
|Sell-through packaged goods - all||$10.3bn||$9bn||-13.3%|
|Sell-through (including EST)||$10.8bn||$9.5bn||-12.2%|
|Subscription (physical only)||$2.3bn||$2.4bn||4.1%|
|Total rental (excluding VoD)||$5.9bn||$5.7bn||-3%|
|Total rental (including VoD)||$7.6bn||$7.5bn||-0.8%|
|Electronic sell-through (EST)||$508.1m||$553.7m||9%|
|Total US home-entertainment spending||$18.4bn||$18bn||-2.1%|
Source: DEG: The Digital Entertainment Group. Rental data is projected based on studio estimates
US top 10 bestselling home-entertainment titles 2011
|1||Harry Potter And The Deathly Hallows: Part 1|
|2||Harry Potter And The Deathly Hallows: Part 2|
|5||Transformers: Dark Of The Moon|
|9||The Lion King|
|10||The Hangover Part II|
Source: Nielsen VideoScan First Alert
Video entertainment in the UK
The sector was worth $3.5bn in 2011, with signs consumers are migrating towards digital. By Andreas Wiseman
In 2011 overall sales of discs in the UK fell 4.9% in value year-on-year, according to the British Video Association (BVA), as consumers continued to migrate towards an expanding digital offering.
However, DVD and Blu-ray are still by far the most popular video entertainment, with consumers spending $2.7bn (£1.75bn) on more than 207 million units in 2011. Film (not including children’s and music DVDs) accounted for 64.2% of physical disc volumes in 2011, down from 65.5% in 2010, and 54.7% of physical disc value, up from 54%. Blu-ray uptake increased.
Harry Potter And The Deathly Hallows: Part 2 was the bestselling DVD of 2011, fuelling bumper Christmas sales that were up more than 8% year on year to almost $773.7m (£500m), while UK productions and co-productions accounted for the top four best-selling DVDs of the year.
The first title on the UltraViolet platform, Final Destination 5, was released in December. BVA director general Lavinia Carey believes the introduction of UltraViolet could dramatically alter the landscape in the coming years: “The biggest news on the digital and innovation front is the fact UltraViolet arrived in the UK. It arrived by stealth but it’s a sign of things to come. Our hope is that UltraViolet will transform the digital market so it becomes as flexible and interoperable as the physical market.”
When added to digital and rental transactions, total consumer spend on video entertainment in 2011 is estimated to be more than $3.5bn (£2.25bn).
Subscription video-on-demand services Netflix and LoveFilm were busy locking up content deals in 2011. There were also new online services from HMV, whose high-street business took a battering, and Tesco among others.
IHS Screen Digest estimates downloads and digital rental transactions grew in value by 15% in 2011. Online services, particularly streaming and downloading, account for around 13% of the overall video market, and were worth an estimated $451.9m (£292m) in 2011.
UK physical video distributors by market share of volume 2011
|Rank||Distributor||Market share %|
|2||20th Century Fox||14%|
|10||Entertainment In Video||3%|
Source: Official Charts Company
UK top 10 physical video releases by volume 2011
|1||Harry Potter And The Deathly Hallows: Part 2||Warner Home Video||2.8m units|
|2||Harry Potter And The Deathly Hallows: Part 1||Warner Home Video||2.7m units|
|3||The Inbetweeners Movie||Channel 4||2.1m units|
|4||The King’s Speech||Momentum||1.9m units|
|5||Pirates Of The Caribbean: On Stranger Tides||Walt Disney||1.2m units|
|6||Despicable Me||Universal Pictures||1.2m units|
|7||Paul||Universal Pictures||1.1m units|
|8||Tangled||Walt Disney||1.05m units|
|9||Transformers: Dark Of The Moon||Paramount||1.01m units|
|10||The Hangover Part II||Warner Home Video||1m units|
Source: Official Charts Company. NB: titles in bold indicate sales that include box-sets.
Both UK charts are for DVD and Blu-ray and both include all titles which had a theatrical release in 2011.