DEG Year-End 2006 Home Entertainment Sales Update

Monday, January 8th, 2007 

More than 30 Million U.S. Homes Have an HDTV
Sales of High Definition Media Devices Exceed 750,000 Units
Consumer Spending Remains Strong at $24 Billion for Home Entertainment Sales

LAS VEGAS — The home theater is one of consumers’ preferred choices for enjoying entertainment as demonstrated by growing demand for high definition products in 2006, according to DEG: The Digital Entertainment Group in an announcement made at the International Consumer Electronics Show (CES). Popularity for the home theater was evidenced in robust sales for HDTVs, remarkable initial sales for high definition media devices and strong sales for DVD.

U.S. Household Penetration Of HDTVs Tops 31 Million

According to figures compiled by the DEG based on data from the Consumer Electronics Association (CEA), retailers and manufacturers, an estimated 12.5 million HDTVs were sold to U.S. consumers in 2006. Nearly five million HDTVs sold in the fourth quarter alone.

Since launch in 1998, more than 34.5 million HDTV sets have been sold to consumers. The HDTV household provides the ideal environment to enjoy high definition media players. There are currently 31 million HDTV households which are able to make full use of high definition media players, when set up properly.

The DEG estimates that 11 percent of HDTV owners have more than one set.

Sales Of High Defintion Media Devices Exceed 750,000 Units

High definition media devices including set top box and game consoles launched in North America in 2006. These players are available at some 10,000 storefronts and sold through well over 750,000 units, according to numbers compiled by the DEG with input from retail tracking sources.

The high definition players including Blu-ray Disc and HD DVD are available at some 7,500 storefronts and are marketed from leading manufacturers. There are currently 12 models with prices from as low as $499 (manufacturers’ suggested retail price street prices may vary).

Consumer Spending On Home Entertainment Discs Remain Solid

Consumers spent $24.2 billion renting and buying DVDs and VHS in 2006, according to the DEG. While DVD sales were up, VHS transactions were off, leaving consumer spending for the home entertainment category unchanged from the previous year.

DVD retail sales were up slightly to $16.6 billion. DVD rental transactions grew approximately 10 percent to $7.5 billion in 2006. When including VHS sales and rental, the dollars spent on home entertainment was virtually the same as the previous year. Consumers spent $24.2 billion renting and buying DVD and VHS.

U.S. Consumer Home Entertainment Spending (in billions)

YEAR
DVD SALES DVD RENTAL TOTAL CONSUMER SPENDING ON DVD TOTAL CONSUMER SPENDING ON HOME VIDEO
(DVD & VHS – RENTAL & SELL THROUGH)
1999
$0.7 $0.1 $0.8
$12.8
2000
$1.9 $0.6 $2.5
$14.0
2001
$5.4 $1.4 $6.8
$16.8
2002
$8.7 $2.9 $11.6 $20.3
2003 $11.6 $4.5 $16.1 $22.5
2004 $15.5 $5.7 $21.2 $24.5
2005 $16.3 $6.5 $22.8 $24.3
2006 $16.6 $7.5 $24.1 $24.2

Source: DEG: Digital Entertainment Group

In the fourth quarter 2006, some 570 million DVDs shipped to retail according to figures compiled by Kaplan and Associates on behalf of the DEG. More than 1.6 billion software units shipped throughout 2006, virtually the exact same amount that shipped in 2005, bringing the total number of units shipped since launch to more than seven billion discs. These figures do not include high definition media discs.

North American DVD-Video Software Shipments (in millions)

QUARTER 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
1st Quarter N/A 3.3 11.1 29.0 69.2 120.1 231.7 332.2 403.0 395.8
2nd Quarter N/A 4.1 13.9 33.2 81.7 152.2 195.5 316.8 369.1 346.1
3rd Quarter 2.3 5.9 29.0 42.7 75.9 153.3 214.6 340.9 347.9 343.3
4th Quarter 3.2 11.8 44.0 77.5 137.6 259.4 381.5 528.4 536.7 571.4
YEARLY TOTAL 5.5 25.1 98.0 182.4 364.4 685.0 1023.3 1,518.3 1,656.9 1,656.6
TOTAL SHIPMENTS
(since launch)
  30.6 128.6 311.0 675.4 1,360.4 2,383.7 3,902.0 5,558.9 7,215.3

Figures compiled by Kaplan, and Associates on behalf of the DEG: Digital Entertainment Group

DVD U.S. Households Reach 88 Million

According to figures compiled by the DEG based on data from CEA, retailers and manufacturers, an estimated 33 million DVD players were sold to U.S. consumers in 2006. More than 11 million DVD players sold in the fourth quarter alone.

Since launch in spring 1997, nearly 200 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 approximately 88 million (adjusting for households with more than one player). The DEG estimates that 55 percent of DVD owners have more than one player.

U.S. DVD Hardware Sales (in millions)

QUARTER 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
1st Quarter .030 .094 .358 1.350 2.220 3.565 4.858 6.855 7.741 7.852
2nd Quarter .079 .149 .611 1.435 2.404 3.750 5.506 6.057 6.006 6.676
3rd Quarter .077 .244 .880 1.550 2.537 4.740 6.470 6.593 6.250 6.831
4th Quarter .119 .459 1.701 5.542 9.501 13.058 16.9 17.621 16.740 11.301
YEARLY TOTAL .305 .946 3.550 9.877 16.662 25.113 33.734 37.125 36.737 32.66
TOTAL
(since launch)
                  194.362

*Includes set-top and portable DVD players, Home Theater in Box systems, TV/DVD and DVD/VCR combination players
Source: DEG: Digital Entertainment Group