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HD-DVD key to home video revenue growth

18 October 2006

A new study from Kagan Research, ‘The State of Home Video (11th edition)’, reports that the mix of sell-through revenue is set to change as high definition DVD takes hold of the marketplace.

“In 2006, the bulk of the $16.9bn revenue will come from standard definition DVD ($16.8bn),” said Wade Holden, Kagan analyst. “By 2009, VHS will be virtually extinct and high definition DVD revenue should grow to more than $2.6bn as the format war works itself out, either via one winning format or a combination HD DVD/Blu-ray player being introduced to the market. By 2015, VHS will be history and high definition DVD will be the major-market shareholder with $18.3bn in revenue.”

The report states that the boom times are gone for the home video industry and the situation may become worse in the wake of a high definition DVD format war. Kagan estimates revenue will drop again in 2006, off 0.4% to $24.1bn. The dip will come from the decline in rental revenues, off 8.3% to $7.2bn. Sell-through revenue is estimated to grow 3.4% thanks to DVD revenue hitting $16.8bn.

Other key findings and projections include:

  • Kagan expects rental revenue will continue to decline throughout the next decade as VoD technologies gain a larger following. Total rental revenue is estimated to be $4.2bn in 2015, posting a negative 5.8% CAGR for the decade.
  • Online revenue has been steadily increasing its share of the market, grabbing 17.2% in 2005, or nearly $2.8bn. Online revenue has posted a 182% CAGR since 1997, a larger growth rate than the bricks-and mortar growth of 115%.
  • In 2005 Kagan tracked 491 titles released on DVD and estimates they made $9.2bn in wholesale revenue for the studios. The average wholesale price of a DVD grew 3.9% to $16.70 from $16.08 in 2004.
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