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US home entertainment market growing modestly: Study

MUMBAI: Spending on movies and TV shows in the home entertainment market eked out one per cent growth in 2013, the second straight year of increase after declining at a 3 per cent compounded annual growth rate from the market peak in 2004 through 2011, according to preliminary estimates of the US market from IHS Technology.

Modest growth in pay-TV video on demand, and strong increases in Internet sales, rentals and subscriptions, drove the two-year gain in home entertainment revenue from $17.6 billion in 2011 to $18.3 billion in 2013.

In 2013, pay-TV revenue grew by 1 per cent, while Internet sales increased by 39 per cent, rentals rose by 40 per cent and subscriptions expanded by 31 per cent. That is the second straight year of 30 per cent-plus growth rates for the digital home entertainment categories that now make up more than one-third of the market.

However, the critical factor is that spending on physical discs at rental and retail is not declining as fast as it was during and immediately after the recession of 2007-09. Total US consumer spending on purchases and rentals of movies and television shows on disc dropped to $11.7 billion in 2013, down from $12.9 billion in 2012, based on data from the IHS US Video Intelligence service. This represents the ninth consecutive year of decline for the U.S. home video market, but at single-digit rates for the second year in a row rather than the double-digit drops seen as recently as 2011.

IHS senior analyst US video Michael Arrington said, “While 2013 was another record year for the theatrical box office, that didn’t translate into an increase in disc sales and rentals, given the ticket returns and resulting video success of last year’s hits including ‘The Avengers’ and ‘The Hunger Games’. While many factors have contributed to the nearly decade-long fall in U.S. consumer video disc spending since the market peaked at $21.9 billion in 2004, one long-term issue is consumers’ rising interest in alternative diversions, including streaming digital video, video games, mobile devices and apps, and Internet offerings like YouTube.”

Average monthly US consumer spending on physical video rental and purchasing dropped to $8.95 in 2013, down from $9.87 in 2012. Overall, however, U.S. consumers spent more on transactional home entertainment, including video on demand combined with electronic purchase, rental and subscription via the Internet. Transactional spending increased to $13.94 per month in 2013, up from $13.88 in 2012.

Blu-ray’s modest gain can’t make up for DVD decline : Total sales of discs fell to $7.5 billion, down 9 per cent from $8.2 billion in 2012. The mature DVD segment suffered a 13.6 per cent decline in revenue in 2013. Meanwhile, Blu-ray managed only a meagre 2.6 per cent expansion. While unit sales grew by 4.2 per cent to reach 124 million, rapidly falling prices made for a weak revenue increase.

Rental illness : US rental spending in 2013 slipped by 9 per cent, falling to $4.3 billion, down from $4.7 billion in 2012. The drop was partly driven by rental-store closures and the loss of disc subscriptions at rental leader Netflix.
Rental spending at kiosks, which had grown strongly during the previous several years, expanded only 1.2 per cent in 2013, as Redbox slowed expansion and focused on absorbing its NCR acquisition while also optimising existing locations and customer behaviour.

Home video passing the torch to digital delivery: The physical-product share of the home entertainment market dropped to 64 per cent of spending in 2013, down from 96 per cent in 2004. Along with the rise of alternative forms of entertainment, the U.S. physical home video market is being impacted by other factors.

Arrington noted, “During the heyday of DVD, the widespread availability of cheap discs allowed most consumers to build enormous video libraries. Now consumers have become more discriminating in their purchases. And with the rise of iTunes and other online sources, it’s pretty much an equal choice for buyers whether they want to purchase a video title on disc, or download it from the Internet. Under these circumstances, an increasing number of consumers are choosing the download option.

“Unless Blu-ray Disc prices stabilise and box-office performance stays high, as it might with sequels to ‘The Avengers’ and ‘The Hunger Games’ on the table, another year of Blu-ray unit growth that is slight at best could yield a downward turn in spending for the format in 2014. In any case, any reasonable amount of growth in Blu-ray is unlikely to prevent what will next year become a decade of decline for a once-thriving disc market.”