Blu-ray may save day as DVD sales slump

By Carl DiOrio

LOS ANGELES (Hollywood Reporter) - DVD revenue in the U.S. fell by 8% in 2008, but a new research report projects it's only a matter of time before Blu-ray begins to compensate for declining returns from traditional discs.

For now, the picture is a bit dimmer. Even accounting for the sales of the fledgling high-def format, the home entertainment industry absorbed a 6% decline last year.

The industry trade organization Digital Entertainment Group (DEG) circulated year-end data for the segment on Wednesday, even as researcher SNL Kagan released a report projecting an incremental strengthening of home entertainment revenue over the next several years.

Kagan said growth in the installed base on Blu-ray players eventually will help compensate more meaningfully for DVD declines

"We expect a resurgence ... over the next couple of years, thanks to high-definition," Kagan forecasts in its report, dubbed "The State of Home Video."

"Retail revenue should start to grow again in 2010," Kagan said. "Sales should start a short period of growth as high-definition player prices drop below $200 in 2011 and Blu-ray really begins to penetrate the mass market."

DVD sales and rentals totaled $21.6 billion in '08, according to the DEG. Adding in Blu-ray and near-negligible VHS boosted overall consumer spending to $22.4 billion.

The declines were worse than in the previous calendar year, when the initial wane in DVD interest shaped a 2% falloff in home entertainment revenue. Yet industryites' collective reaction seemed to be that it could have been worse in 2008, with DEG suggesting the data shows the home entertainment market proved "stable" and "resilient" last year.