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Monday, March 1, 2004

DVD Sales Cannibalizing CD Sales

CD's - No, DVD's - Yes.
Compare CDs with DVDs. For about the same amount of money -- and often less -- a DVD delivers:

• Two hour+ feature of audio AND video;
• gorgeous video quality;
• An informative booklet and/or decorative case;
• pristine audio;
• Extra features, outtakes, deleted scenes, "making of the film" documentaries, interviews with director, actors, writers.

CDs are a lousy deal: For your $18 suggested retail price, you get about 45 minutes of pre-recorded music. Sometimes, you even get more than a page of liner notes. It comes in a cheap jewel case which is all but certain to break eventually

The trend of substituting DVDs for CDs started some time ago. Where its really visible is in the home collector market. A recent N.Y. Times article describes the rise of the mega-collector -- DVD consumers whose collections of the shiny discs number in the 100s and sometimes 1,000s:

"According to Adams Media Research, consumers spent $14.4 billion last year on movies for the home, almost $5 billion more than they spent on theater tickets or video rentals. With more than 27,000 DVD movies to choose from, mega-collectors are building libraries of 1,000 titles or more, and some are starting Web sites and Internet databases to help fellow fans manage inventory. On the heels of the software is new hardware, including 300- and 400-disc DVD changers. If they ever catch on, they may prove to be the key to organizing so many shiny silver discs.

"Nobody saw this coming," said Jan Saxton, Adams vice president and media analyst, who attributes the boom to several factors, from the low prices of DVD players to the higher quality of video and sound on the discs. "No one anticipated how much consumers would feel the pull of the $9.99-to-$14.99 impulse buy at Wal-Mart. They didn't anticipate how ready the American consumer was to collect films."

Alex Rosten of Los Angeles, with a collection of 542 DVD's, said that for him, it is economics. "When I rent a DVD, it costs around $4," he said. "Add to that the inevitable late fees and the hassle of having to return it, and I'm looking at a lot more than I bargained for. Most DVD's cost $10 to $20, so it makes more sense for me to purchase. And I have the option of watching it whenever I want."

The average price of a new release on DVD is $21.85, although if you know where to shop, it will be cheaper. The sale-rack titles, those older movies referred to in the business as "catalog releases," generally cost about $12. "As an option, it often compares favorably to renting," Ms. Saxton said. "Of course, there are movies you really don't want to own - that's why we don't see the rental market fading away."

[DVD Price Search]
[NY Times - DVD's? I Don't Rent. I Own.]
[via Barry L. Ritholtz - The Big Picture]

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