'Iron Man' takes on market
October 10, 2008

The meltdown in worldwide financial markets over the past several weeks is making it harder than ever to predict fourth quarter home entertainment sales, including how quickly consumers will adopt the Blu-ray format.

On one hand, statistical indicators are mostly bleak.

* U.S. chain stores posted a weak 1% increase in same-store sales during September, according to the International Council of Shopping Centers, making it the softest month since 2001, when the 9/11 terrorist attacks paralyzed consumer spending. ICSC expects October sales to grow 1.5% to 2.5%.

* TNS Retail Forward last month forecast (before the current financial crisis) that fourth quarter retail sales will remain roughly on that slow pace, rising just 1.5% above 2007 levels. When surveying shoppers, it found 37% said they plans to spend less on holiday gifts than they did in the prior year. About 46% of shoppers said they would spend the same as the year earlier, down from 58% in 2007 and 60% in 2006.

* According to the most recent results of the Royal Bank of Canada’s CASH (Consumer Attitudes and Spending by Household) Index, U.S. consumer confidence dropped 32 points, or almost by half, from September to October - the largest single-month decline in overall sentiment since the Index began in January 2002. In RBC’s October survey, 69% of consumers said they were less comfortable making a major purchase (home theater? Blu-ray player?) than they were six months ago, up from 55% in September.

On the other hand, these are broad-based views that don’t take into account the specific dynamics of the home entertainment market. Most studio execs are quick to point to filmed entertainment as historically recession-proof, or at least recession resistant, and to say that home entertainment, in particular, provides great value to consumers who are clutching their purse strings more tightly.

*TNS and other prognosticators acknowledge that mass merchants and online retailers—which dominate DVD and Blu-ray sales—will fare better than the overall market.

*For many consumers, the markets’ drop is a direct challenge to long-term savings, for such things as retirement and college, and, unless family jobs are lost or businesses hobbled, will have a more indirect effect on household cash flow.

* DVD and Blu-ray are small-ticket items with a high perceived value, and are favorite loss leaders used to generate foot traffic at mass merchants.

*Paramount’s Iron Man became the biggest selling DVD of the year so far, and the top Blu-ray debut to date, while the financial markets plummeted. If the reinforcements lined up behind – Zohan, Indiana Jones, Kung Fu Panda, WALL-E, Hancock and The Dark Knight—perform similarly, this mixed crew of heroes, super and otherwise, may be able to save the home entertainment industry from a fall.

Posted by Marcy Magiera on October 10, 2008 | Comments (0)