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Top Industry News Story

Video boom is pressing 'pause'
By Thomas K. Arnold, Special Contributor, 7/25/05

The video industry's biggest annual gathering opens Tuesday in Las Vegas amid some sobering news: DVD is now 8 years old and facing some growing pains.

After seven years of explosive growth, the industry appears to be leveling off. The Video Software Dealers Association meets amid signs of such softening:

• Total video sales for the first 26 weeks of 2005 are pegged at $7.3 billion, up 2.2% from the same period last year; DVD sales account for $7 billion, up 7.3%, according to data from Home Media Research. By comparison, DVD sales in 2004 were up 26% from the previous year.

• Videocassette sales fell 59% in the first six months of 2005; they generated just $227 million.

• Rentals were off 3.2% from last year, coming in at an estimated $4 billion.

• Total sales of the top 50 DVD releases in the first half of 2005 were down 5.5% from sales of the top 50 DVD releases in the first half of 2004, according to data from Nielsen VideoScan.

And in recent months, two studios, DreamWorks and Pixar, were hammered by the financial press for overestimating sales of Shrek 2 and The Incredibles.

"Many people had predicted a leveling off of the marketplace, and that indeed is what's happening," says Bob Chapek, president of Buena Vista Home Entertainment and DEG: The Digital Entertainment Group.

Adds Benjamin Feingold, president of Sony Pictures Home Entertainment: "Business is softening on the feature-film side."

Two factors are leading to the slowdown, Chapek and other executives say. First, the "early adapters" who rushed out and bought DVD players as soon as they arrived on the market have bought so many DVDs over the years that they're approaching the saturation point.

"You're looking at libraries in excess of 100 DVDs, and at that point, (buyers) start to be more selective," Chapek says.

Meanwhile, the latest wave of converts is not buying as aggressively as their predecessors.

"You don't have people jumping into the market and loading up their libraries," says Steve Beeks, president of Lions Gate Entertainment.

But don't mistake the slowdown as a sign that the sky is falling, studio heads say.

Buena Vista's Chapek says that with the vast majority of U.S. households, more than 80 million, expected to have at least one DVD player by the end of this year, it's only natural that the sharp growth trajectory of recent years would begin to level off.

"We're in the mature phase of this business," he says.

More than 770 million DVDs came out in the first six months of this year, according to figures compiled by Kaplan, Swicker and Simha for the DEG — up 19% from the first six months of 2004.

Studios and independent DVD suppliers also are trotting out a record number of new releases for the remainder of the year. Those include high-profile theatrical features ranging from Star Wars, Episode III: Revenge of the Sith (Nov. 1) to special editions of classics such as The Wizard of Oz (Oct. 25).

Also in the pipeline are hundreds of season sets of popular TV shows such as Alias and a wide range of more esoteric fare, from documentaries to art-house films.

"Product proliferation is overwhelming," says Mike Dunn, president of 20th Century Fox Home Entertainment. "We're looking at 40% more product, and it's being led by TV DVD."

Desperate Housewives: Felicity Huffman, left, Marcia Cross,Eva Longoria and Teri Hatcher arrive on DVD Sept. 20.


Among titles being touted at the Video Software Dealers Association meeting in Las Vegas Tuesday, these will arrive by year's end:

Spring and summer movies
Sin City (Aug. 16)
Robots (Sept. 27)
Kingdom of Heaven (Oct. 11)

Guerrilla: The Taking of Patty Hearst (Sept. 27)
Rated R: Republicans in Hollywood (Oct. 25)

TV, new and retro
Lost: The Complete First Season (Sept. 6)
Desperate Housewives: The Complete First Season (Sept. 20)
The L Word: The Complete Second Season (Oct. 25)

Oldies but goodies
Beefed-up editions of:
The Truman Show (Aug. 23)
Toy Story (Sept. 6)
Ben-Hur (Sept. 13)
Oliver (Sept. 27)
Cinderella (Oct. 4)
The Wizard of Oz (Oct. 25)
La Dolce Vita (Nov. 8)

Children's titles
Disney's direct-to-video Lilo & Stitch: Stitch Has a Glitch (Aug. 30)
Fox's Bratz: Rock Angels (Sept. 13)

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