The Bleeding In The Home Entertainment Business Slowed In 2011

The home-entertainment business has been pummeled in recent years, with revenues falling for seven years in a row, in one year a full 8 percent. But last year, according to the latest numbers from a research group, things brightened slightly, thanks mostly to the rapid growth of digital streaming.

The Digital Entertainment Group, a research consortium backed by Hollywood’s major studios, released data Tuesday showing that overall home entertainment revenue declined only 2 percent in 2011. As shrinkage goes, it was the smallest since 2008 for the challenged entertainment sector, which tallied $18.4 billion in total rentals and sales for the year, according to DEG. That $18.4 billion includes the revenue for everything from DVD and Blu-ray, to cable and satellite VOD, to downloads and streaming, of movie and TV content. Interestingly, in the second half of 2011, the DEG reported that revenue from rentals and sales of “home filmed entertainment,” physical and digital alike, actually rose 1 percent.

Even though the DEG is backed by the studios, its revenue numbers are often cited as official benchmarks of industry performance. According to the DEG, the home entertainment market has declined every year since 2004, when it peaked at $21.8 billion, mainly because of the decline of DVD sales.

One caveat to the latest numbers from the DEG: They were helped by a change in the group’s equation. For the first time, the DEG included revenue from subscription streaming services, which resulted in nearly $994.6 million in additional revenue for 2011.

Overall digital spending for home entertainment – which includes VOD through various carrier services like DirecTV (NYSE: DTV) and Comcast, and electronic sell-through via vendors like Apple’s iTunes – was up 50 percent, according to the trade group, to $3.4 billion.

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The kiosk business continued to grow, too, with rentals through outlets like Redbox increasing 31 percent to $1.66 billion. And rentals of Blu-ray and DVD through subscription services like Netflix (NSDQ: NFLX) kept on growing, as well, increasing 4.1 percent to $2.36 billion.

As the studio-backed trade group is prone to do, it touted the performance of high-margin physical media, noting that Blu-ray sales and rentals had increased 20 percent in 2011, reaching $2 billion for the first time.

Still, the market’s legacy revenue streams remain in steep decline. Rental through brick-and-mortar outlets continued to circle the drain, declining 29 percent to just $1.64 billion. And overall sales of “packaged goods” – DVD and Blu-ray – declined 13 percent to $8.9 billion, brought down by the continued cratering of the older format.