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Analyst Sees DVD Sales Decline

By 2007

Published: 11/08/2005 12:00am

A recently released study of the American DVD market by an analyst at Goldman Sachs predicts that the meteoric DVD sales phenomenon is about to start reversing its trajectory.  Catalog (or backlist) sales, which currently account for 40% of the market (with 60% going to new releases), will be hurt the most, since with the current 80+% penetration into U.S. households the freest spending consumers have already been on board the DVD gravy train for a while and have presumably built up their libraries of older movies and TV series.  Within the next 12 months the studios will also have also released the TV series and backlist movies with the most sales potential, which could spell trouble for sales of all but the latest releases in the future.

 

According to the report from Goldman Sachs, which is analyzed in the current issue of Home Media Retailing, sales of DVDs will still post a solid 10.2% gain in 2005, but this represents a leveling off following the meteoric rises of 51.4% in 2003 and 33.3% in 2004.  Unit sales for 2006 are expected to rise only about 1.2% followed by a drop of 8.2% in 2007.  Of course many other factors such as the emergence of a couple of Lion King-size hits or the successful introduction of a high definition DVD format could maintain at least some of the DVD sales growth of the past few years, but so far (at least judging from theatrical revenues) there is nothing resembling a Lion King in the offing and with two competing high definition DVD formats it appears unlikely that over the next few years consumers are likely to ditch their current DVD libraries for an incremental upgrade in quality to high definition.

 

As the studios dip further into their catalogs searching for obscure genre titles with at least some potential appeal to a niche audience, there may be opportunities for independent retailers who specialize in particular genres, although price competition from Internet retailers will likely remain fierce.  If sales of catalog titles continue to decline, the big box stores will undoubtedly shift their attention to the best-selling new releases -- a trend that has already been reflected in Target's shift away from anime (see 'Target Phasing Out Most Anime').

 
 
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