Fourth Quarter 2001 Banner Finish for Home Video Industry

For Immediate Release
January 7, 2002:  New York, NY

Orderly Transition to DVD Format Yields Peak Total Rentals and Sales In History of Home Video Industry

• Purchases surge more than 22 percent, rentals up 4 percent
• Impact of 9-11 seen in VHS rental activity

New York – January 7, 2002 – The home entertainment market in 2001 surged to its highest levels ever as consumers continued their transition to new digital technologies, according to Alexander & Associates, a New York-based entertainment industry research firm.

The overall market – including purchases and rentals of both VHS and DVD product – grew to almost $25 billion in consumer spending, up 12 percent from the year 2000.
According to the company, the events of September 11 heightened the already present weakness in the consumer economy, and that in turn contributed to increased rentals.  Tracking data during October showed a substantial increase in total units rented, with about 80 percent of the increase attributed to households with at least one unemployed or part-time employed member.
 

Alexander & Associates’ proprietary Rental Market Barometer, a three-week rolling average of total rental behavior, illustrates how a relatively weak rental market rebounded in late September.

Video Flash Manager Pat Moran, observed, “Consumers that were unwilling to watch the extensive news coverage at that time turned to renting home video.”  The company’s barometer showed that while the combined rental market was down 4 percent prior to September 11 in terms of units rented, the market was up more than 6 percent during the 16 weeks after that date relative to 2000.

Greg Durkin, Alexander & Associates’ research director, said:  “The performance of this market this year underscores the value of the packaged goods portion of the home entertainment market.  Families that were hit by soaring unemployment rates rediscovered the tremendous value of this medium.  But households that were moving into the new digital technologies found their interest in packaged goods home entertainment rekindled as well.”
 
 

Sell-through Soars

While the rental market showed strength, the sell-through market was the real champion in 2001, growing by 22 percent to $11.1 billion.  The key driver in this strong market expansion was purchases of theatrical feature films released on DVD.  Purchases of DVD product grew by $2.1 billion from 2000 to 2001.

The sell-through market also experienced considerable juggling in retail rankings. This year, Wal-Mart not only put in a repeat performance as the VHS product leader, but also surpassed 2000’s leader Best Buy to come out on top in the DVD category.

According to the company, the number of purchases of home video product on the Internet also grew despite flat growth in the “online” category market share. Robert Alexander, president of Alexander & Associates added, “Many people in the industry were expecting VHS to fall off as DVD became more popular.  In effect, DVD didn’t really cannibalize VHS so the market was able to grow by $2.6 billion. We have never seen this kind of growth before in the 15 year history of our tracking.”
 
 

Additional information on each of these three key points is provided below.
 
 

About Alexander & Associates
Alexander & Associates is a marketing and management consulting firm working with clients in the entertainment industries. Since 1987, they have produced Video Flash, a weekly home video market measurement instrument for studio and retail clients.

The company maintains an active program of special research projects, which include:

• The Holiday Market Snapshot, a detailed look at the holiday-season home video sell-through market;
• The Video Game Snapshot, a monthly tracking of primary gamers and console usage;
• The Pipeline Analysis, a special study on the interaction of advanced satellite & digital cable television services, satellite distribution, and home video; and
• The annual Computer/Video Game Benchmark Study, the longest-running, comprehensive cross-platform analysis of the new electronic media in consumers’ homes.

If you have any questions or for more information, call 212.684.2333 or email us at aainfo@alexassoc.com.