2006 ends on upswing

Electronics, catalog sales helped push DVD revenue above last year

By Susanne Ault and Jennifer Netherby -- Video Business, 12/28/2006

DEC. 28 | Consumer demand for flat-screen TVs, new videogame systems and other high-end electronics drove interest in home entertainment on the whole and helped push DVD sales above last year during the year-end shopping season, according to retailers.

Catalog promotions also played a role.

“It was a good DVD Christmas,” said John Marmaduke, CEO of Hastings Entertainment. “With all of the flat-screens being sold, I think that DVD was on top of people’s minds this year.”

“I definitely think the videogame stuff really brought people in,” said a video buyer with another chain. “That was a big factor. There was nothing available for PlayStation 3. But the Wiis are doing incredibly well, and same with Nintendo DS and Xbox 360.”

Many chains, such as Trans World Entertainment, do not release official December sales results until early January. But many retailers were projecting a fairly healthy December, due to four full weekends for people to shop for Christmas.

Rentrak’s Retail Essentials point-of-sale tracking service forecasts DVD sales will end the holiday season slightly up from last year. DVD sales at bricks-and-mortar stores between Nov. 25, the day after Thanksgiving, and Dec. 23 were up 0.18% this year compared to the similar period in 2005, according to Rentrak. But the 2005 period included Christmas Eve, Dec. 24. When Christmas Eve sales are factored into 2006, Rentrak expects to see even more of an increase for the season.

Virgin Megastores DVD business was up double-digit percentage points for December versus the same frame last year.

“We’ve had a remarkable December,” Virgin buyer Chris Anstey said. “DVD sales have been growing stronger for the past few months, but the spikes we’ve seen in the past three weeks have been outstanding, even taking into account the strong lifts that normally come with the holiday season.”

Sales were boosted by Virgin’s new customer loyalty program and catalog discounts, which were a factor at numerous retailers.

Fueled by studio repricings, aggressive catalog promotions started on Black Friday, the day after Thanksgiving, and were expected to carry over through the end of 2006.

For the week started Dec. 24, Circuit City offered a wide selection of hit catalog titles at $4.99 apiece. A Los Angeles-area Wal-Mart circular for the same period highlighted the chance to buy two DVDs for $9. In a one-day-only Christmas Eve fire-sale, Best Buy was selling two-for-one Sony Pictures Home Entertainment TV DVD sets, including Seinfeld and Rescue Me. Also on Dec. 24, Best Buy was offering 50%-off HBO TV DVD sets, representing as much as $115 off regular pricing.

Newbury Comics buyer Ian Leshin believes catalog promotions even stole some of the thunder from hot new releases, which included the year’s record seller Pirates of the Caribbean: Dead Man’s Chest.

Beatles film A Hard Day’s Night sold more than 500 copies at the retailer during the week prior to Christmas, outperforming the title’s total sales in the last two years. 2003’s Pirates of the Caribbean: The Curse of the Black Pearl sold 10 times more copies in December than in November. Clerks, which was first released on DVD in 1999, sold five times more in December than the prior month.

The titles were priced at less than half their typical tag, after studio program discounts and Newbury coupons.

“I ordered more than we usually do on some of these evergreen titles, but we were running into stock issues in the middle of the month,” Leshin said. Consumers “were jumping at the aggressive pricing.”

The overall holiday retail picture was less hopeful, with sales tracking firms lowering their forecasts for the season. The International Council of Shopping Centers shaved down expectations for same-store sales growth to 2.5% from earlier expectations of 3%.

Mastercard’s SpendingPulse reported that holiday sales were up 3% compared to 2005, less than the 5.2% sales increase last year.

On the online front, sales from Nov. 1 through Dec. 20 were up 26% to $21.68 billion, according to ComScore Networks. The fastest-growing categories online included videogames, which were up 65%, and videogame consoles, which lifted 54%, the research firm reported.

Amazon.com said that 2006 was its best holiday season yet. The retailer offered weekly promotions that customers chose as part of its Amazon Customers Vote promotion. Amazon said it sold 1,000 Xbox 360s in 29 seconds and 1,000 Axion portable DVD players in 34 seconds.