DVD Doldrums? Consumer Interest in Purchasing Recent Movies Declines

NPD: 27 percent of consumers who viewed purchased DVDs last year cut back such viewing this year .

A significant decline in consumer interest in purchasing DVDs of recent movies upon their release. In the first five months of 2005, 11 percent of DVD buyers reported that they planned to purchase a DVD from movies running in the theaters when it became available, but during the same period in 2006, just nine percent planned to do so. This new finding is in line with other recent data from NPD showing that 27 percent of consumers who viewed purchased DVDs had cut back such viewing this year compared with last.

Many people want to blame the ongoing decline in DVD sales on time shifting with DVR, spending additional time on the Internet, and exploring emerging digital options and online subscriptions. In fact these reasons have much less to do with the slowdown. Instead consumers — especially lighter buyers — are simply seeing less value in purchasing DVDs of recently released movies.

Only 10 percent of consumers who viewed purchased DVDs said that they bought more than they did last year, but it’s precisely those consumers who still see the value in DVDs and continue to add to their collections. Consumers who continue to buy more DVDs are also heavy consumers of other entertainment content, debunking the myth that these alternatives are helping shift key consumers away from DVDs.

VideoWatch data for the year ending April 2006, 47 percent of all videos were rented, 30 percent were purchased from a store, 15 percent were from subscription services, eight percent from pay-per-view (PPV) or video-on-demand (VOD) services and one percent was downloaded directly from the Web. NPD estimates that sales of new DVDs grew by seven percent in the first quarter of 2006 versus the year prior. This growth rate compares favorably to box office attendance, which declined year-over-year by nine percent in 2005, although industry estimates show a mid-year box office increase of nearly three percent in 2006.

Even with slower growth for the industry lately, reports of the impending death of the DVD format have been wildly overblown. What the industry should be very concerned about is losing touch with a segment of customers who are less dedicated to purchasing and viewing DVDs. The industry has to find ways to make these consumers more aware of the available video content, whether it’s through major media, or more aggressive in-store efforts; otherwise, they will drift -- especially if there isn’t a lineup of ‘gotta have’ titles coming out of the theaters.

DVD Doldrums? Publ 20060711