On Disney’s (s dis) fiscal fourth quarter financial results call yesterday, CEO Bob Iger said the decline in DVD sales that the industry has seen over the last several years is not necessarily due to a down economy, but a shift in the way users consume content and the entertainment that is available to them.
Iger has been bearish about the DVD market for sure, and the latest trends merely reinforce what he sees as a secular decline in DVD purchases. On the call he said:
“On secular versus cyclical and the overall question about DVD trends, I’ve been pretty vocal about that business, suggesting that while many believe that we are seeing cyclical trends that were due to the downturn, that we thought that they were secular trends that were also impacting the business due largely to just more competition for people’s time more than anything else.”
The most recent indication of the trend comes from DVD sales of Disney/Pixar blockbuster Toy Story 3, which has been on sale over the last few weeks. Based on the immense popularity of the Toy Story franchise, as well as the latest entry’s box office success, you’d expect that the title would do very well relative to the rest of the DVD market. But when you compare Disney’s expectations for Toy Story 3 DVDs to previous similar titles, Iger said the difference is sobering:
“If ever there’s a title that would do well it would be Toy Story 3, particularly in the sell-through side because it’s a title that just makes a lot of sense for people who are going to let their kids watch it multiple times to own versus rent, for instance. It will do quite well. I am not going to make predictions as to what it will do, but if you were to look at the numbers for Toy Story 3, which will be extremely strong, versus what films we did just three, four, five years ago, you’d be sobered by those numbers.”
While sales of physical media are down, Disney is trying to appeal to users with packages of film titles that tie ownership of the DVD or Blu-ray disc with digital access to the same film. Earlier this month Disney announced a deal with Wal-mart’s (s WMT) Vudu, for instance, that would allow users to stream Toy Story 3 over any Vudu-supported device if they buy the DVD at Wal-mart. Iger said that the package is selling at a premium, which gives Disney some pricing leverage.
Even so, just as it was difficult for the music industry to replace the loss of physical CD sales with digital sales on iTunes, (s AAPL) Amazon (s AMZN) and other digital marketplaces, it will be tough for studios like Disney to make up for the loss of DVD sales in the years to come.
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