Why the Home Entertainment Business Is in Its Best Shape in Half a Decade

Why the Home Entertainment Business Is in Its Best Shape in Half a Decade

Consumer spending is flat. Believe it or not, that's an accomplishment

 At least the numbers are moving in the right direction.

For the second year in a row, the home entertainment industry grew by a blip in 2013, generating $18.3 billion in consumer spending on Blu-Rays, DVDs and electronic copies of films and TV shows, according to a report by IHS Screen Digest.

With growth of less than 1 percent from the previous year, the numbers are essentially flat, but the collapse of the DVD business led to seven straight years of declines prior to 2012. It's easy to understand why the industry is heartened by this minor achievement.

“It’s the best health the business has been in for half a decade,” Tom Adams, a home entertainment analyst at IHS, told TheWrap. “That’s encouraging even though it was very modest growth.”

Indeed, IHS’ survey is the second one this week to show that the sector didn't lose ground. The studio-backed Digital Entertainment Group released its own numbers on Tuesday, which showed consumer spending holding steady at $18.2 billion.

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Not that everything is rosy. Given the strong sales of Christmas home entertainment releases such as “Despicable Me 2” and “Fast & Furious 6,”  some studio executives had privately expected to see growth of two or three percentage points, so these numbers are softer than anticipated. Moreover, DVD sales continue to be a weak spot for the business, with total spending falling 13.6 percent to $5.2 billion. Blu-Ray sales grew 2.6 percent to $2.2 billion, but that was not enough to offset the decline in DVD retail.

So why are analysts like Adams optimistic? As expected, electronic sales jumped nearly 39 percent to $1.3 billion, the first time that figure had eclipsed the billion dollar mark. Total digital spending, including rental, subscription services such as Netflix and video on demand climbed 24.8 percent to $6.5 billion.

“For a few years there, it was a disastrous time for the business and there were a lot of people who were saying that the ownership model was dead,” Adams said, noting that the strong growth of electronic sales show those predictions “…have proven not to be true.”

Studios cite the decision to offer films and television shows for digital purchase two to three weeks before discs debut in stores as a key reason for that growth. Adams agrees.

“Studios deserve some credit for experimenting and some of their bets seem to be paying off,” he said.

Here's the full chart, courtesy of IHS:

 

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