High-def media to dominate home video market by 2012

Monterey (CA) - It will take high-definition media - HD DVD and Blu-ray - another six years to surpass the revenues generated by standard definition DVDs, a market forecast suggests. Even with sales that are estimated to come in at less than $100 million this year, the battle between the two HD formats has begun to show a negative impact on the video industry.

According to Kagan Research, the total home video market, including sold and rented movies, will dip about 0.4% to about $24.1 billion in 2006. The decrease is mainly attributed to an 8.3% decline in rental revenues, down to about $7.2 billion, which the research firm attributes especially to the increased popularity of video-on-demand download services. Online services are estimated to have captured 2.8 billion and has been growing on an annual pace of 182% since 1997, Kagan said.

Standard definition DVDs are leading the video sales market by an unchallenged margin at this time. 99.0% of the $16.91 billion market are generated by DVDs, while HD DVD and Blu-ray will account for about $80 million this year. The dying VHS format is still somewhat visible, with expected revenues of about $90 million. VHS will be dead by 2009, Kagan says, and, while DVD revenues will be stable at about $16.78 billion, high-definition will account for more market share. However, considering that high-def will be already three years old until then, a 13.6% share or $2.64 billion in revenues may seem a bit low: Kagan estimates that standard DVDs wills till hold an 86.4% share at the end of this decade.

It will take high-def until 2012 until the format will surpass sales of DVDs. Kagan estimates that HD media will hold a 54% share and by 2015 69%. Total revenues from disc sales for 2012 are estimated at $27.9 billion and $26.7 billion for 2015.

For the short term, Kagan believes that "the boom times are gone for the home video industry and the situation may become worse in the wake of a high-definition DVD format war." According to the firm, high-definition, however, will be key for the industry on the way to stabilizing and growing revenues. "By 2009, VHS will be virtually extinct and high-definition DVD revenue should grow to more than $2.6 billion as the format war works itself out, either via one winning format or a combination HD DVD/Blu-ray player being introduced to the market," Kagan said.

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