Sales of digital content into the home rose sharply in the first quarter of 2011 to $613.8 million, up 9% from $562.6 million a year earlier, but the increases were not enough to overcome a significant 20% decline in spending on sell-through DVD and Blu-ray disks, according to the Digital Entertainment Group's First Quarter 2011 Home Entertainment Report.
As a result of the declines, overall consumer spending on sell-through and rental content declined from $4.64 billion in the first quarter of 2010 to $4.19 billion in the first quarter of this year.
While the declines were potentially bad news for the Hollywood studios, which are heavily dependent on revenue from home entertainment, much of the decline in DVD sales was based on extenuating circumstances, rather than an overall shift from packaged media to digital media, the DEG report argued.
The group noted that sales were depressed by the fact that the movies released in the first quarter of 2011 in DVD and Blu-Ray were much weaker than last year's slate and that this year's first quarter data did not include Easter, which is a traditionally important holiday buying season.
Sell-through sales have sharply rebounded since then and were up by 20% in the first weeks of the second quarter. DEG is still predicting that overall consumer spending on home media will be either flat or slightly up in 2011.
Despite the significant growth in digital content revenues, these remain small, just $140.6 million in the first quarter for 2011 for digital electronic sell-through and $473.2 million for VOD.
In contrast, revenue from sell-through of packaged disks was $2.2 billion.
The group's report also noted that seven million HDTVs were sold in the first quarter, up 11% from a year earlier, and that HD sets are now in 64.5% of all U.S. homes.
In addition Blu-ray hardware sales also increased by 13%, boosting the number of U.S. homes with Blu-ray players to 30 million.