- Video shipments to retailers fell 13% in the first seven months of 2010
- But video sales to consumers apparently rose by at least 5.5%, despite FIFA World Cup and lower unit shipments
- Discrepancies between the two datasets mean up to 5m units sold are unaccounted for
Screen Digest has updated DVD and Blu-ray Disc (BD) retail (sell though) forecasts for Brazil on the basis of January-to-July shipment data from the Brazilian video association UBV and feedback from industry sources.
The total number of retail video units shipped in Brazil between January and the end July 2010 (the latest available data) declined 13.2% over the same period in 2009, according to data from the UBV. DVD shipments fell to 8.7m from 10.3m in 2009, a decline of 15.6%. Shipments of BD units increased by 222% to 331,000 units over that time period, but this was not sufficient to offset the decline in DVD.
In direct contrast, both the retail tracking services active in Brazil, GfK and Nielsen, reported an uplift in DVD and BD sales in the first three quarters of 2010. Even more surprisingly, monthly retail tracking indicates data little if any slowdown in retail growth for the duration of the FIFA (soccer) World Cup in June and July - an event which in Brazil, a nation of almost unparalleled football enthusiasts, has historically had a considerable negative impact on home entertainment consumption. Instead, combined DVD and BD retail volume sales are reported to have grown by between 5.5% and 15% to end September, depending on the source used.
Following extensive research and feedback from the Brazilian industry, we have adjusted our forecasts accordingly and we now expect DVD unit shipments to decline by 4% in 2010; representing shipment volumes of 31.4m units in 2010. Screen Digest expects growth in BD shipments to continue, reaching 600,000 units by the year's end.
However, based on the data reported by the retail tracking services, we are currently forecasting DVD sales to consumers to increase 7.5% to 35.8m units, generating R$626m ($314m) in consumer spending. BD sales will continue to grow as more retailers expand the space given to the format and consumers are expected to buy 390,000 units in 2010, accounting for R$28.7m ($14.4m) in consumer spending.
The significant discrepancy between shipment data and consumer sales as reported by local tracking services aptly demonstrates the difficulties involved in trying to monitor video market trends in Brazil.
The difference between the two datasets effectively means that around 5m units - or around 14% of the total - apparently sold through to consumers without having been shipped. The only explanation that has been forthcoming from local sources is that the discrepancy may reflect a stock readjustment by retailers. However, given the sheer volume of product involved, this would suggest that either the largest retailer in the territory, Lojas Americanas (which accounts for close to half of the total market, according to our research) had effectively stopped all purchasing for a number of months - or virtually every one of its competitors had. Such an event has not been reported by our sources. Furthermore, if the 5m units sold through represented redundant stock, shifting it would have required a high degree of price cutting, which is not shown by the Brazilian retail tracking figures.
Another explanation might be that shipments by the members of the UBV do not reliably reflect total market trends, and that the association's share of the total retail business is declining. However, our research indicates that the strength of titles such as Fox's Avatar and Disney's Alice in Wonderland, have actually increased the proportion of the market accounted for by the US studios, all of which are members of the UBV.
The first half decline in shipments to the Brazilian market, as reported by the UBV, is consistent with both a gap in the release slate, created to accommodate the football, and a decision by retailers to lower their sales expectations through this period.
Meanwhile, it is true, of course, that Brazil's performance in the World Cup was poor by the country's standards, a fact that may have affected World Cup viewing after the national team was knocked out on 2 July. The fact that neither of the retail tracking services reports any significant impact from the football on consumer sales in Brazil adds some weight to the suggestion that Brazilian consumers continued to purchase video throughout summer 2010 and at a higher rate than in 2009.
Looking ahead, Screen Digest expects a far more positive second half performance at trade level, reflecting not only the end of the World Cup but also a sudden surge of interest in home entertainment from a host of households newly equipped with DVD or BD playback devices, a direct result of their buying new TVs to watch the football. Anecdotally such a spike in hardware sales has already been reported.
We also believe this overall increase in the addressable retail market has already further boosted video sales at consumer level and will continue to do so through the final quarter of 2010. Meanwhile the strong performance of key US titles is pushing average DVD prices up.
We therefore anticipate that throughout the remainder of 2010 the discrepancies between shipment and retail sales trends will reduce, reflecting the expected second half retail surge. Screen Digest will, however, continue to monitor the Brazilian market closely; making adjustments to forecasts should it prove necessary. As always, we welcome feedback on any aspect of this analysis from Video Intelligence subscribers.