The DVD businesses, one of the movie industry's biggest sources of profits, is expected to post a year-over-year sales decline for the first time since the format's rise a decade ago. Sales, which were flat a year ago at around $16 billion, were down over 4% through the end of November, and analysts expect a full-year drop of around 2%.
Total home video revenues, which include sales and rentals of both DVD and VHS, are forecasted at around $23 billion, down from $24 billion in 2006.
Even though the industry still has a number of heavy hitters on the way, including the latest installments of Pirates of the Caribbean, Bourne and Harry Potter, and the film adaptation of The Simpsons, they would have to power a big surge in total DVD unit sales just to break even with last year.
Even big box office hits aren't an automatic slam-dunk on DVD. Analyst Alan Gould, notes that DVD sales for latest sequels in the Spider-Man, Fantastic Four and Shrek franchises, all fourth quarter releases, have come up short.
"Blockbuster films are generating fewer DVD unit sales than in previous cycles," he said. "Where a big picture used to sell 20 million units, top movies now struggle to reach 10 million units." He estimates that Spider-Man 3 will sell fewer than 5 million units. The last installment sold 5 million on its first day.
While theatrical distribution generates the biggest gross revenue for movie studios, DVD sales make the most money. That's because box office receipts are split evenly with movie theater operators, while studios keep all the revenue from DVD sales.
The DVD drop isn't unexpected. Some analysts at the end of last year were forecasting a 2007 decline due to saturation, advances in technology like video-on-demand, Internet downloading, and growing competition from video games and other entertainment. (info from The New York Post)