For the first time since 2002, U.S. consumers spent more to see Hollywood movies in theaters last year than buy them on DVD and Blu-ray discs, industry figures showed on Monday, and that trend is expected to continue.
In recent years, Hollywood has come to rely on the high profit margin from DVD sales to underwrite the large cost of producing and marketing films, but with DVD sales dwindling, the movie industry is reexamining its business models.
Adams Media Research reported on Monday that U.S. box office receipts boomed to $9.87 billion in 2009 and overtook DVD and Blu-ray sales of $8.73 billion.
Overall DVD and Blu-ray sales including films, television shows, concert videos and other content declined about 10 percent to $13 billion in 2009, Adams Media said.
The movie disc business peaked in 2004 with U.S. sales of $12.1 billion. With the film industry increasingly relying on the small but growing sectors of on-demand television and online distribution, movie disc sales are not expected to rebound to those peak figures from six years ago.
It's going to be a more diverse marketplace with more ways of getting movies, therefore packaged sales aren't going to see the kind of growth that we saw with DVD, said Tom Adams, president of Adams Media Research.
The $8.73 billion consumers spent in 2009 to buy movies on DVD and Blu-ray was down 13 percent from the year before, Adams Media said. U.S. box office receipts for 2009 were up nearly 10 percent from the year before.
The last time U.S. box office receipts eclipsed disc sales was in 2002, Adams said.
Adams said the figures for 2009 are still preliminary, as late December sales had to be projected.
Hollywood would like to see Blu-ray sales pick up the slack from slumping DVD business, but that has been hampered by the recession and changing consumer patterns. Blu-ray uses advanced digital technology to produce a sharper picture than DVDs.
About $1.1 billion of the movie discs bought in 2009 were on Blu-ray, and the number of homes with Blu-ray players grew from 3 million to 8 million.
But even as Blu-ray has seen growth, sales of movies on discs have been undercut by the rise of low-cost rental options, such as Coinstar Inc's kiosk chain Redbox, which rents DVDs for $1 a day, and online subscription services such as Netflix Inc.
Those two sectors of rental have really been growing, and causing people to hesitate about how many discs they're going to buy, Adams said.
Movie disc rentals in 2009 grew to $8.15 billion from $8.11 billion in 2008.
In 2009, the domestic box office reached a record high $10.6 billion, but that includes Canadian ticket sales that were taken out of the numbers compiled by Adams Media.