Summary:

DVD sales haven’t exactly been a growth business recently — sales have been slowing for a couple of years now. But Merrill Lynch analyst Je…

DVD sales haven’t exactly been a growth business recently — sales have been slowing for a couple of years now. But Merrill Lynch analyst Jessica Reif-Cohen says there may be help on the way. In a report this morning, she says that the home video market may get a lift from online downloads and Blu-Ray, which last year beat out HD DVD in the format wars as the preferred technology for the movie industry’s transition to high def. She says rapid growth of online and Blu-Ray could even return the home-video industry to modest growth in 2011, and even as DVD sales continue to fall. She says:

– Alternatives to DVD sales, including Blu-Ray, online downloads, and other rental methods like Netflix (NSDQ: NFLX) and kiosks are growing at a double-digit clip, albeit from a small base.

– Recent estimates by researcher Global Media Intelligence of 300 percent Blu-Ray growth in 2009 are probably “slightly aggressive,” she says, suggesting that Reif-Cohen still believes that triple-digit growth is feasible this year.

– Blu-Ray currently represents only 4 percent of the home-video market, but for popular titles can represent 20 percent of all purchases.

– While DVD sales were awful in the fourth-quarter of 2008 (down 15 percent) some of the declines were likely due to serious belt-tightening among consumers and deep discounts from retailers; DVD sales are down in the first quarter of 2009, but have stabilized some, declining in the mid-single-digits.

Reif-Cohen does point out there are risks to her forecast, namely worse deterioration of the DVD market than expected and continued competition from video games.

Photo Credit: /pitzyper!

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