The global video business lost more than US$2.6bn in 2008 due to a combination of a fall in both DVD purchases and rentals by consumers.
According to Screen Digest, internationally last year consumers spent US$26.4bn on video software, while two-thirds of that was spent on buying DVD discs.
This represents a 3.6pc drop on 2007 spend, and a 4.7pc drop on disc sales alone.
The sales figures are in line with the overall trend that saw consumer spending plateau between 2004 and 2007 and the North American market starting to decline in 2007, signalling the start of a global downward trend.
The high-definition (HD) Blu-ray (BD) format was heralded by the industry as the answer to the decline of DVD.
However, the format war with Toshiba’s HD DVD meant the strong, unified marketing that had worked so successfully for DVD’s launch a decade earlier was not replicated.
This, coupled with a worldwide recession in consumer spending and the easy availability of video via other means such as downloading, pirate, legal and illegal temporary ownership, ensured that despite strong sales of BD discs in 2008 of US$482m, they barely made a dent in the missing revenue.
The physical rental market is coming under pressure from many sides, including ever-cheaper disc sales, piracy, downloading and legal and illegal temporary ownership.
As mass-market rental chains adopt ever more aggressive pricing strategies to keep customers, online rental services such as LoveFilm International in Europe and Quickflix in Australia have helped ease the decline of physical rental. However, online rental is not effective in all markets.
Three countries that have experienced double-digit growth in consumer spend in 2008 are China, India and Russia. At present, their combined spend accounts for only 4pc of the international total (US$979m), therefore placing the combined countries just ahead of Italy in international rankings.
Whilst this is small, these markets have attracted the eye of the Hollywood studios as a result of their performance.
“We expect BD to account for 6.9pc of international video spending this year – assuming there is strong promotional activity,” explained Helen Davis Jayalath, senior analyst at Screen Digest.
“However, despite consumers’ interest in the HD format and demand for packaged media, the current challenging economic climate means that we don’t expect BD to be driving even minimal sector growth until 2010.”
By John Kennedy
Pictured: X-Men go Blu, the X-Men Trilogy in Blu-ray