U.S. home video spending falls 1.8% in 2014 while digital sales surge

Consumer spending on digital video for the home increased in 2014, while the DVD business continued to crumble, according to the Digital Entertainment Group (DEG).

Jan. 6, 2015 10:23 AM PT

Increased interest in digital movies and Netflix weren’t enough to make up for broader declines in the home entertainment market in 2014.

Sales of digital home video titles jumped to more than $1.5 billion in the U.S. last year, up 30% from 2013, according to the Digital Entertainment Group, a Los Angeles-based industry association. Additionally, subscription streaming services grew 26% to $4 billion in annual consumer spending.

Electronic sales are a bright spot for the studios, which have seen revenue from the DVD business crumble over the years.

But the big increases in the digital realm couldn’t completely offset the weakness in the traditional, physical space.

Total consumer spending on home entertainment was $17.8 billion last year, down about 2% from 2013, according to DEG’s figures, which were unveiled at the Consumer Electronics Show in Las Vegas.

The downshift comes after the industry posted a slight uptick a year ago.

Sales of physical movie discs declined 10% for the year to $6.9 billion, despite popular releases such as “Frozen,” “The Hunger Games: Catching Fire” and “The Hobbit: The Desolation of Smaug.”

Rentals suffered, in particular.

People spent a total of $3.3 billion renting movies through various outlets (not including video-on-demand services), down 14% year-over-year. The kiosk business, which includes Redbox, saw a 4% drop in sales to $1.8 billion, while the brick-and-mortar industry plummeted 27% to $696 million.

The movie studios have tried to encourage customers to use so-called digital lockers such as UltraViolet to store their digital movie copies. UltraViolet accounts grew 30% in 2014, reaching 21 million, DEG noted.

However, subscription services continued to account for far greater spending than electronic sales.

In total, Americans’ spending on digital video for the home, including streaming services, rose 16% to $7.5 billion.

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