While DVD rental service Netflix (NFLX) says business is booming this quarter, DVD sales aren’t doing so well.
Pali Research analyst Rich Greenfield says in a blog post today (registration required) that new release sales are down “almost double digits” despite solid performance in the first half of the year, and that catalogue sales are down “only modestly.” Greenfield now expects the DVD business to shrink 6% year-over-year, worse than his previous estimate of flat sales in 2008.
Hurting DVD sales: Retailers like Walmart (WMT) opening more floor space to Blu-ray discs, which has such a tiny installed base that they can’t come close to making up for DVD sales.
But Greenfield says Blu-ray trends are “encouraging,” with top titles selling more than 1 million copies. Selling especially well: Movies that appeal to gamers. Why? Because while Greenfield expects standalone Blu-ray players to hit 2.5 million units by the end of the year, he expects Sony PS3 game consoles — which include built-in Blu-ray players — to reach 8 million units by the end of the year.
The big question: As companies like Apple (AAPL), Netflix (NFLX), and Microsoft (MSFT) push digital movie services, will enough people bother buying Blu-ray players — even as they keep getting cheaper?