By Ben Fritz
Hollywood's home-entertainment business is headed in the wrong
direction again.
After two years of modest growth, total U.S. revenue from
in-home viewing of movies dropped 1.8% to $17.8 billion in 2014,
according to new data from the Digital Entertainment Group trade
association.
Last year's drop was driven by continued declines in sales and
rentals of physical DVDs along with a surprising drop in
video-on-demand rentals. After many years of growth, VOD rentals
from cable, satellite and Internet providers fell 6.7% to $1.97
billion last year.
"The VOD market is so big and important....It's critical that we
get it growing again," said Ron Sanders, president of home
entertainment for Time Warner Inc.'s Warner Bros.
Among the changes that could boost VOD, Mr. Sanders said, are
simpler user interfaces and more options to rent and watch movies
on portable devices.
Home-entertainment revenue grew less than 1% in 2013 and 2012
after dropping the prior seven years--a trend that put a major dent
in the bottom lines of studios.
Studio executives attributed the overall drop in 2014
home-entertainment revenue in part weak results at the domestic box
office last year. If movies weren't popular in the theater, there
will be less demand to watch them at home.
As reported, overall North American box-office receipts for 2014
declined more than 5% to $10.35 billion from $10.92 billion in
2013, according to box-office tracker Rentrak Corp.--the worst
results since 2011. Attendance for 2014 was also down, but final
data on ticket sales for the year isn't available yet.
DVD and Blu-ray sales dropped 11% from 2013, as consumers
continued to abandon physical media. Kiosk rentals, a business
dominated by Outerwall Inc.'s Redbox, fell 4%, reflecting that
company's recent struggles as it has run out of lucrative new
locations and has lost customers to digital competitors.
The best news for the movie industry was 30% growth in digital
sales, to $1.551 billion. Sales of films from online retailers such
as Apple Inc. and Comcast Corp. are the most profitable type of
home entertainment transactions and a category studios have focused
intently on growing.
To boost digital sales, studios regularly release movies for
online sales before the DVD and VOD launch date. Comcast's
Universal Pictures set a new industry record by offering its Seth
Rogen comedy "Neighbors" online six weeks before it was available
on disc.
"I would have liked to see growth, but when you consider the
weaker slate and that we are driving growth in the most profitable
transactions, I think overall it's a pretty good picture," said Mr.
Sanders.
Walt Disney Co.'s " Frozen" was the most popular home-
entertainment title of 2014, according to the DEG, followed by
Lions Gate Entertainment Corp.'s " The Hunger Games: Catching
Fire," Warner Bros.' " The Lego Movie," Warner's " The Hobbit: The
Desolation of Smaug" and Disney's " Guardians of the Galaxy."
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