The Economist writes: “thanks to the DVD and its ability to store a feature-length movie at high quality on a small disc, Hollywood now earns more money from home entertainment than from the showing of films in cinemas. In 2003, Americans spent $22.5 billion on DVDs and videocassettes compared with $9.2 billion at the box office, where receipts fell slightly for the first time in a decade…Sales and rentals of DVDs account for two-fifths of the studios’ revenues, according to Adams Media Research, compared with under 1% in 1997…What is particularly exciting for the movie industry is that people are choosing to buy rather than rent DVDs, as they mostly did with videos.”
This is yet another example of how industries are going digital. As the cost of DVD players has fallen to under USD 30, sales of DVDs have taken off, giving studios another lucrative franchise. Piracy remains the biggest threat. Says the Economist:
Hollywood is at the same euphoric stage with DVDs now as the music business was in the 1990s, when consumers bought CDs to replace their vinyl records. After that, piracy and internet-downloads struck and the music industry shrank. Video files are much bigger and can take many hours to download, which for a while offers some degree of protection. Nevertheless, having seen what happened to the music business, Roger Ames, chairman and chief executive of Warner Music Group, advises his colleagues in the film world to join big music’s effort to sue individual consumers who download content illegally from the internet. Unless the studios get tough, he warns They have no idea what’s coming their way.