Blu-ray down, DVD sales flat: a crisis in consumption?

New figures released show sales of Blu-ray movies are declining at a time where DVD sales figures are at best flat or worse in trouble after years of huge growth and massive profits. No one is calling the end of an era quite yet, but clearly something is going on in the movie industry, and we may be seeing the end of the DVD lead movie sales boom.

Is it an issue directly related to the economy or is it an issue of over consumption?

Variety reported in August that movie rentals are up, indicating that as economic conditions worsen (and this was pre the latest Wall Street crisis) people are more likely to rent a movie than buy one. And yet they note in the same paragraph:

However, sales of catalog and TV series on DVD are robust, suggesting that sagging DVD movie sales may be due to the maturity of the business -- and to the quality of the titles.

How many DVD's are enough? The industry saw saturation coming, and was hoping that Blu-ray would drive new sales based on the premise that people would want to have a copy of their favorite movies in HD. The problem being is that people haven't bought in, and they are content with their current DVD libraries. There has been no rush to buy Blu-ray titles, and an aimed marketshare of 50% by the end of the year will be lucky to hit 10% instead. As Blu-ray players become cheaper, more people will buy Blu-ray movies, but only when buying new titles, not in most cases as replacements for their existing libraries.

But this doesn't explain the DVD slump. Wired reports this month that movie execs are saying they've seen no downturn in the DVD business, and yet Variety the month before reports:

"None of the studios are making their marks," an industry research analyst states. "Week to week, there have been double-digit declines."

...Even the most bullish execs will concede this summer's light DVD slate exacerbated declining new release fortunes. The ongoing deterioration is creating a ripple effect throughout the industry.

But even before the summer, new release sales were trending downward. According to analyst Tom Adams, "there was another decline, and a fairly substantial one at that," for theatricals debuting on disc the first half of the year. He says the average overall perf was down 12% in first half, and he expects further declines through the end of the year, although he expects the sheer number of year-end releases to offset individual shortfalls.

So is there a downturn or not? Let's take a middle line and say growth is flat, and as Variety notes, there are two factors at play, content and market maturity. Content is easy enough: Hollywood hasn't had as many blockbusters as in previous years, and the flow on effect is lower sales once the movies make it to DVD. But maturity is the interesting factor. Has mass consumption and high sales delivered a market that can take less consumption because, to use a food cliche, it is full or close to it? DVD has been a huge success, and many have big libraries of movies, a brilliant marketing strategy that probably delivered beyond the studios wildest dreams. But how much is enough? As sales become flat, we see no increased desire to consume more. If sales are down, we see people content with their existing libraries, as we see with Blu-ray. They may still add to their collections, but in no where near the volume of years past.

The Digital Challenge

The movie industry is yet to face the same challenges we see in the music industry. There has been no mass uptake of digitally delivered content, even if we see increasing sales of both movies and TV shows from Apple's iTunes store and others obsess with pirated content. Most people don't have a digital content conduit in their loungerooms, so although I may rent a movie on my Apple TV this weekend, I am among a small few. But as we know, things are rapidly changing. The age of internet enabled televisions is upon us, and with mass market penetration, so to will consumption switch from physical media to digital media.

I would have bet that Blu-ray would have been the last great physical distribution medium, but it may never get to a point where it is. The successor to DVD will be digitial delivery, but the consumption argument stays the same.

People are not going to rush out and buy digital content (even if it's HD) when they own the same title on DVD. An upsurge in rentals will help drive digital uptake, but a drop in actual sales presents the same issues to digital content as it does to Blu-ray and DVD. We're not seeing a consumption shift in delivery, we are seeing a consumption shift based on scarcity, or lack there of to be precise. The challenge for the various companies looking to role out digital delivery in the coming years is how do they make the offering appealing when the end user may have past saturation point when consuming media.