Another Tough Quarter: Say Goodbye to the Traditional Home Entertainment Biz

Another Tough Quarter: Say Goodbye to the Traditional Home Entertainment Biz

The disc sales business is circling the drain faster than ever, as more consumers opt to rent/stream movies through Netflix or Redbox rather than purchase them

The big news is not that the home entertainment business had another rough quarter. That's come to be expected at this point. 

The real story was how the home entertainment business shifted during the first quarter: U.S. spending dropped 10 percent overall as more consumers opted to rent or stream movies and TV shows through Netflix and Redbox rather than purchase them on DVD or Blu-ray.

According to the Digital Entertainment Group, disc sales dropped 20 percent during the first three months of the year and rentals at bricks-and-mortar stores fell a whopping 36 percent from the same period a year ago. Subscription and kiosk rentals, meanwhile, grew 33 percent and 31 percent, respectively. 

The overall rental revenue, $1.98 billion, grew only slightly, increasing 2.5 percent from the year ago tally. Consumers just rented their movies in different ways.

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Overall, consumers spent $4.19 billion on home entertainment during the first three months of the year, compared to $4.64 billion during the comparable period last year.

Disc sales generated $2.07 billion in the quarter, down sharply from $2.58 billion during the same period a year ago. The decline was reduced slightly when around $600 million in digital sales — also referred to as electronic sell-through — was added to the tally.

The message was clear: The traditional home entertainment business is going, going gone. These shifting patterns help explain why there have been so many studio VOD deals lately. 

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Bricks-and-mortar rentals generated $440 million, compared to $689 million from a year ago. Subscription rentals, streaming included, brought in $696 million, up from $523 million. And kiosk rentals a la Redbox generated $368 million, compared to $281 million.

Digital home entertainment revenue climbed 9 percent in the first quarter on greater electronic sell-through and VOD, but only accounted for $614 million of the $4.19 billion spent on home entertainment in the first quarter. 

The DEG attributed the sales decline to the lower number of big films released during the quarter, and the fact that Easter fell outside the first three months this year. It somewhat optimistically predicted that consumer spending will end the year flat.

Whatever the final results, the business is unlikely to shift back to the old consumption patterns. As the organization itself noted, the home entertainment business is morphing as new technologies and services become available.