DEG Report: Home Entertainment Biz Down Just 0.7% in Q2

Small decline comes after 8% drop in first quarter, according to industry trade group

The home entertainment business' freefall appears to be slowing down.

Industry trade consortium the Digital Entertainment Group released figures Monday showing that revenue from sales and rentals of DVDs, Blu-ray discs and digital downloads dropped just 0.7 percent in the second quarter of this year, after dropping 8 percent in the first quarter.

Overall, the business is down 3.3 percent at the midway point of this year to $8.8 billion.

Notably, disc sales dropped only 3 percent in the second quarter, the smallest quarterly drop for packaged home-entertainment media in several years.

Continuing an ongoing — and foreboding — trend, the revenue continued to trend down in the first half of the year, despite the fact that overall rental and sales transactions increased by 2.3 percent.

Low-margin rentals by vendors including Redbox and Netflix continue to have an effect on the profitability of the business.

While the DEG continued to tout the growth of Blu-ray — sales of the hi-def discs were up 84 percent to $733 million in the first half of 2010 — the format's market share remains small compared with DVD more than four years after launch.

Likewise, sales of digital downloads increased nearly 37 percent to $285 million in the first half of this year, accounting for only a small portion of the overall business.