DEG Releases Third Quarter U.S. Home Entertainment Results

Blu-ray Disc Software Sales Up 83 Percent for the Year; Sales of Blu-ray Set-Top Players Increase 112 Percent

LOS ANGELES — DEG: The Digital Entertainment Group released third quarter U.S. sales figures for the home entertainment industry today. Consumer spending for the third quarter of 2009 in the home entertainment window for pre-recorded entertainment, which includes DVD, Blu-ray Disc and digital distribution, was off slightly at $4 billion, down by 3.2 percent compared to the same period last year. Blu-ray Disc software sales continue to show dramatic growth with overall sales up 83 percent for the year and playback devices in 11.7 million U.S. households. The DEG also announced that consumer transactions for all home entertainment products were up 6.6 percent for the third quarter compared to the same period last year.

Overall, the home entertainment window continues to show ongoing stability given the current economic environment. Although consumer spending on sell-through packaged media was down 13.9 percent in the third quarter, Blu-ray was up 66.3 percent to $161 million compared to the same period last year (up 83 percent year-to-date to $568 million). Digital distribution (including both video-on-demand and electronic sell-through) was up 18 percent for the quarter to $420 million (up 20 percent year-to-date to $1.4 billion). Furthermore, according to Rentrak Corporation’s Home Video Essentials, rental spending was up 9.9 percent for the quarter, with Blu-ray rental spending up 44.5 percent.

“We are pleased to see an uptick in the number of consumer transactions, indicating a continuing strong demand for home entertainment product,” said Ron Sanders, President, DEG and President, Warner Home Video. “We are also encouraged by the dramatic growth of Blu-ray and the increases in digital distribution and rental in the third quarter.”

Blu-ray, proving to be home entertainment’s stand out performer in 2009, is accounting for 12 percent of all theatrical new release sales in the third quarter. The year’s best selling Blu-ray Disc title “X-Men Origins: Wolverine” (Twentieth Century Fox Home Entertainment) and “Watchmen” (Warner Home Video) have each approached or surpassed 30 percent of consumer spending on Blu-ray Disc.

“Titles that appeal to the early adopter demographic continue to perform increasingly well on Blu-ray, representing upwards of 20 percent of all physical media sales,” said Bob Chapek, Chairman, DEG and President, Walt Disney Studios Home Entertainment. “As the penetration of Blu-ray increases, we are beginning to see the same kind of response by mainstream audiences that we are seeing in early adopters.”

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.

Blu-ray Adoption Quickens

According to figures compiled by Swicker and Associates on behalf of the DEG, more than 17 million Blu-ray Discs shipped to retail in the third quarter of the year, an increase of 35 percent over the same period last year.

According to figures compiled by the DEG based on data from CEA, retailers and manufacturers, Blu-ray Disc playback devices sold 3.3 million units through the first three quarters of 2009, an increase of 13 percent over same period last year. Through the first three quarters of 2009, Blu-ray Disc set-top player sales grew 112 percent over same period last year.

Blu-ray playback device households are nearly 11.7 million and include PlayStation 3 consoles, along with a variety of set-top players that are available as either stand along models or combined with home theater systems. Approximately 80 percent of Blu-ray devices are BD-Live capable.

“We’re enthusiastic about the continued promise of Blu-ray Disc with more entry level players coming to market and the upcoming strong slate of box office blockbusters,” said Amy Jo Smith, Executive Director, DEG. “As we head into the all-important fourth quarter, we believe the power of some of the year’s biggest titles like ‘Transformers: Revenge of the Fallen’ (Paramount Home Entertainment), ‘Harry Potter and the Half-Blood Prince’ (Warner Home Video), ‘Up’ (Walt Disney Studios Home Entertainment), and ‘Ice Age: Dawn of the Dinosaurs’ (Twentieth Century Fox Home Entertainment) will prove extremely popular with Blu-ray enthusiasts.”

Furthermore, according to figures compiled by the DEG based on data from CEA, retailers and manufacturers, approximately four million HDTVs were sold to consumers in the third quarter of 2009 and nearly 12 million sold in the first three quarters of the year. Household penetration of HDTVs in the U.S. is nearly 45 million, representing almost 40 percent of all U.S. households. Approximately 29 percent of all HDTV owners have more than one set.

DVD U.S. Households Tops 92 Million

According to figures compiled by the DEG based on data from CEA, retailers and manufacturers, some 4.6 million DVD players sold to U.S. consumers in the third quarter of 2009.

Since launch in spring 1997, approximately 267 million DVD players, including set-top and portable DVD players, Home-Theater-in-a-Box systems, TV/DVD and DVD/VCR combination players, have sold to consumers, bringing the number of DVD households to more than 92 million (adjusting for households with more than one player). The DEG estimates that 66 percent of DVD homes have bought more than one player.

DVD Hardware Sales in U.S. (in millions of units):

      1997  1998   1999   2000    2001    2002    2003    2004    2005    2006    2007    2008    2009
      ----  ----  -----  -----  ------  ------  ------  ------  ------  ------  ------  ------  ------
1Q    .030  .094   .358  1.350   2.220   3.565   4.858   6.855   7.741   7.852   8.350     5.3     5.8
2Q    .079  .149   .611  1.435   2.404   3.750   5.506   6.057   6.006   6.676   6.396    4.98     4.6
3Q    .077  .244   .880  1.550   2.537   4.740   6.470   6.593   6.250   6.831   6.139     5.2     4.6
4Q    .119  .459  1.701  5.542   9.501  13.058  16.900  17.621  14.343  12.512  12.633     9.5
      ----  ----  -----  -----  ------  ------  ------  ------  ------  ------  ------  ------  ------
Year  .305  .946  3.550  9.877  16.662  25.113  33.734  37.126  34.340  33.871  33.518    24.9    15.0
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TOTAL (since launch)                                                                             267.1

Includes set-top and portable DVD players, Home-Theater-in-a-Box systems, TV/DVD and DVD/VCR combination players