Kagan: High-Def DVDs to Dominate by 2012

By Geoff Duncan October 9, 2006

The eleventh edition of Kagan‘s market research report The State of Home Video forecasts, unsurprisingly, that the VHS video format is in its very last days and that while standard-definition DVD discs rule the market in 2006, their share will diminish as high-definition formats like Blu-ray and HD DVD (or a possible hybrid of the two) gain traction and consumer adoption.

What might be surprising is how much time (or, depending on your point of view, how little time) Kagan forecasts that high-definition disc formats will only comprise more than 50 percent of the DVD retail sector in the year 2012. And in the year 2015, standard DVDs will still account for about one in every three DVDs sold.

Looking ahead, Kagan’s report concludes that the salad days of the home video industry may be coming to an end, with overall revenue for the industry dropping by 0.4 percent in 2006 mostly due to a decline in DVD rental revenue. Kagan predicts DVD rental revenue will continue to decline as video-on-demand and broadband video technologies gain traction in the marketplace: overall, Kagan forecasts that rental revenue will decline to $4.2 billion in 2015, which would represent a compound annual growth rather for the decade of negative 5.8 percent.

At the same time, Kagan estimated that studios earned some $9.2 billion in wholesale DVD sales in 2005, and that the wholesale price of a DVD climbed 3.9 percent from $16.08 in 2004 to $16.70 in 2005.

And if you want some amusing numbers from the report? The long-lingering VHS format is forecast to outsell high-definition disk formats in 2006. Standard DVDs will account for $16.75 billion in sales, while the just-introduced high-definition formats will account for 0.5 percent of the market and about $80 million in sales. And the once-mighty VHS? An estimated $90 million in sales for 2006.

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