The reports on the demise of Blu-ray & DVD are greatly exaggerated

Posted Thursday, May 5, 2011 at 4:55 PM Central
Last updated Thursday, May 5, 2011 at 7:54 PM Central

by John Couture

I sure hope that the great Mark Twain doesn't mind my little homage to his famous quote in the title, but I felt it was uniquely appropriate given all of the mis-leading news stories and headlines swirling around the Internet today. If you only read the headlines, you might be a bit concerned with such caustic language such as DVD Death Watch, Hollywood in Turmoil and Sales Plummet, causing Consternation in Hollywood.

Of course, just like only reading the headline, you would only be getting part of the story, or in this case a very slanted view of a vocal minority. You see, it's always those on the cutting edge of technology that yell the loudest about impending doom despite being an actual minority. In the case of digital downloads versus physical goods such as DVDs and Blu-rays, this minority is truly a very small part of a rather healthy outlook for home entertainment.

For those of you in the dark, the Digital Entertainment Group (DEG) released their industry report on the first quarter of 2011 this week. The doomsdayers out there immediately latched onto the most damning number (the fact that DVD and Blu-ray sell-though was down 18% from the first quarter in 2010) and ran with the premature reports of DVD/Blu-ray's demise.

And it's hard to blame them. They grew up in the TV news era where the mantra was, "if it bleeds, it leads." However, by harping on this singular out-of-context stat, they are doing a complete disservice to the physical goods industry as a whole and they are basically painting their audience as a "bunch of easily-led automatons."

I know that Kevin Smith won't mind my lifting his words from Clerks. Heck, some of them actually include the truly important pieces from the report in their articles but they bury them or glaze over them so fast that you really have to wonder how they ever made it through journalism school.

First and most important, The DEG report clearly states that the 18% drop in sell-through was anticipated by the industry because of 2010's odd release slate that had four titles drop in the first quarter with over $1 Billion in box office receipts. Traditionally, the first quarter is slow for the industry as most studios try to release their big titles in the lucrative fourth quarter.

The March releases of The Twilight Saga: New Moon, The Blind Side, Alvin & The Chipmunks: The Squeakquel and Sherlock Holmes were all positioned at the end of March to take advantage of the busy Easter holiday. Of course, if you only listen to some "experts" like MG Siegler who outright mocks the importance of where Easter falls, you might find yourself in the dark on what is really going on.

MG and the rest of these reports almost uniformly fail to mention that the DEG report does state that the second quarter is off to a strong start (up 20% over 2010's numbers in the first few) and that the strong slate of Summer movies at the box office (projected to hit home entertainment in 4th quarter 2011) will boost 2011's to be flat over 2010 or up slightly.

For an industry that has been hit hard by the economic downturn (consumer spending on home entertainment has dropped every year since 2004), news of flat to slight growth is tremendous news. It's hardly the death rattle of physical goods that they would have you believe.

And what is driving this growth? Believe it or not, it's rental not sell-through. Overall, rental spending increased 2.5% over the same period last year.

Take a minute and think about that. With the demise of brick-and-mortar powerhouse Blockbuster, total rental spending actually increased in the first quarter. While it's true that the majority of this increase is due to kiosks or subscription services such as Netflix, it's still actual DVDs and Blu-Rays, not digital downloads, that is spearheading this charge.

It's true that the home entertainment landscape is changing, but the DEG reports that consumers still prefer physical goods over digital goods over 75% of the time. Additionally, the DEG also notes that the sales of hardware such as HDTVs and Blu-ray players increased in the first quarter which can only mean good things for DVDs and Blu-rays.

So, the next time you read harrowing headlines about doom and gloom home entertainment industry, just realize that like that big film later this Summer sometimes there's more than meets the eye.

As an $18 Billion industry that is growing, the future is rather bright.