Home Video Industry Nears $21 Billion For 2002; DVD Rentals Gain Ground

The home video industry enjoyed a record-breaking year with combined rental and sell-through revenues topping out at $20.6 billion for 2002, according to Bo Andersen, President of the Video Software Dealers Association (VSDA).rnrn

The strong growth of the video industry was driven by the American consumer's embrace of DVD technology.rnrn

According to Tom Adams of Adams Media Research, "Based upon research conducted through mid-December 2002, we derived a preliminary estimate that the video sell-through market will reach $12.4 billion by the end of the year." Revenue from DVD sales will account for 65%, or $8 billion, of these consumer sales dollars - a 51% increase from the $5.3 billion in sell-through revenue enjoyed by DVD in 2001.rnrn

DVD rentals also set new records, with revenues reaching an all-time high of $2.9 billion, reflecting a 106% or $1.5 billion increase from $1.4 billion in 2001. rnrn

According to VSDA's VidTrac program - the video industry's most accurate video rental point-of-sale tracking technology which measures national consumer video rental spending based on actual rental transactions, the 2002 DVD rental revenue figure represents 891.4 million turns vs. 444.8 million turns in 2001. The DVD format share of the total rental market increased from 17% in 2001 to 35% in 2002. "Seeing growth of DVD rentals of this magnitude in 2002 shows that more and more consumers are embracing DVD for both their rental and sell-through purchases," noted Andersen. rnrn

Consumer rental spending on VHS rentals for 2002 totaled $5.3 billion, down 25% from $7.02 billion in 2001. Turns reached 2 billion but overall were down by 23.1% from 2.5 billion in 2001. Accordingly, the VHS format market share shrank 18% percentage points - from 83% of rental revenues in 2001 to 65% for the year 2002. Yet despite reports of its demise, VHS remained the dominant rental format.rnrn

Overall, consumers spent a total of $8.2 billion renting 2.9 billion VHS cassettes and DVDs in 2002. Revenues were down a slight 3% ($250 million) from the $8.4 billion in 2001, with turns down 144 million, or 4.8%, from 2.9 billion in 2001.rnrn

"The home video market continues to grow, remaining the most preferred way to view movies," said Andersen. "With an average rental price of $3.20 for DVD and $2.70 for VHS, and DVDs priced for sale between $10-$25, home video remains one of the most affordable forms of entertainment available. DVD players now sell for under $100 and are in 35% of television homes and 95% of television homes have a VHS player, making this form of entertainment available to everyone. The advantages of low cost, availability and diversity of product, ease of use, and no monthly fee or high-speed Internet service required will keep the home video industry healthy for the foreseeable future."