Retailers Pulling Back On DVDs — Bad News For Hollywood, Terrible News For Big Music

Retailers are cutting back on the floorspace they are devoting to DVDs, says Pali Research’s Rich Greenfield.

We are hearing an increasing number of reports of entertainment executives fighting to maintain DVD floorspace at retail. We suspect mass-merchant retailers (such as Wal-Mart) are concerned by the weakness that occurred in 1H 2007, the disappointing performance-to-date of next-gen DVDs due to a format war with no end in sight (between Blu-Ray and HD DVD that simply confuses consumers), and the new technology pursuits of the studios (such as Day & Date VOD, iTunes, etc

This is predictable — Hollywood has known for years that the end of the DVD boom was coming — but will still be devastating for the studios unless they can replace the income quickly.  For many years, DVD sales have been the single biggest revenue source for feature films. Meanwhile, if the big box retailers are pulling back on DVD sales, what does that mean for the music industry, which still relies on the physical retailers for the 70% or more of its revenue? It means the 7+ year music slump is going to get much, much worse.

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