The DVD Dies Before Our Eyes

Despite the success of 'Avatar' on disc, the format is fading fast

The heir apparent to videotape is being rapidly eclipsed by online delivery of movies and other video content. New data from SNL Kagan illustrate just how fast the shift away from shiny silver discs is happening.

The research shows that the DVD retail market in the U.S. shrank by 44 percent in 2010, delivering total revenue to the studios of $4.5 billion. In 2007, the market was worth more than $10 billion; by 2009, this was already down to $8 billion.

The total number of units shipped in 2010 was 225 million, compared with more than 400 million in 2009 and 517 million in 2007.

The data also show that some anomalies have arisen as the market has collapsed. 2010 was the first year since 2007 when the total number of titles published has risen. In both 2008 and 2009, the studios cut down on the number of releases while raising the wholesale prices they charged to retailers. (This let them hold on to some of the revenue that would otherwise have been lost.) In both 2008 and 2009, the average units sold per title actually increased, passing 1 million in both years. However, by 2010, the rot had set in and the average number of units sold per title had plummeted to 545,000.

The SNL Kagan data exclude sales in Blu-ray format. Some of the migration away from DVD was surely related to this format upgrade. But this is likely to only be a stay of execution for movies on discs.

Two giants rocked the DVD industry in 2010: Fox’s Avatar and Buena Vista’s Toy Story 3. Both sold more than 10 million units and both earned over $200 million for their respective studios. Fox earned more than any other studio from its DVD releases, tallying $606 million from the 15 titles it issued. Warner earned just a little less, still over $605 million from the 24 titles it released, and Buena Vista came in third with revenue totaling $601 million.

As further evidence of the downward spiral, seven of the 15 best-selling titles in 2010 earned their studios less than $100 million in 2010. In 2009, none of the top 15 earned less than $100 million.

Expect more deals between the studios and online movie venues this year.