Market Insight

Danish video disc market set for very steep declines this year

July 07, 2014

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Data released by the Danish Video Association (DVA) for the period January to May 2014 indicate that distributor revenues from DVD and Blu-ray Disc (BD) retail has declined by 64% compared to the same period in 2013, to Dkr 96 million ($12.8 million). The association have attributed this decline in revenue to an unprecedented level of returned discs from Danish video retailers to resellers and distributors.

Our take…

This year marks a full decade of revenue decline for the European video market, one which accelerated after volume sales of the mature DVD format also began to decline in 2008. In 2012, Denmark became the first mature European market to report a decline in consumer spending on BD. Last year, the Danish physical video market contracted by 20% to Dkr 959 million ($128 million), broadly in line with many mature Western markets. However, the very steep rate of decline reported in the first five months of 2014 is, to-date, unprecedented anywhere in the world.

A contributing factor to the decline in physical video consumption over the last decade has been growing consumer adoption of digital video platforms. The rate of decline in physical video in Denmark and neighbouring Nordic countries accelerated considerably in 2013 when US subscription video on demand giant, Netflix, launched services in the region. IHS analysis indicates that the impact of SVoD on physical video market in the Nordics has been a hitherto unrecorded level of cannibalisation of physical video sales. Furthermore, the impact of this has particularly strong on sales of catalogue video titles on DVD which has fallen at a far more rapid rate than those of new release product. Indeed, preliminary new release sales from Denmark suggest blockbuster product continues to perform comparatively well on both DVD and BD formats.

Falling disc consumption further compounded by the effects of the launch of a compelling alternative video proposition, one that specifically competes on catalogue titles, makes holding ranges of such titles far less profitable for retailers. In Denmark particularly, the exceptionally high level of returns recorded by the video associations is a strong indicator that a key retail tipping-point has been reached. This is the point at which the lower volume sales of catalogue video, and thus revenues generated, no longer justify the store space allocated to the product category. For many retailers this will be a point of no return for video—a result of low pricing expectations around catalogue product— and where possible store space will be reallocated to alternative non-video products.

Examples of this in Denmark are widespread:

  • Food retailer Coop has recently reviewed its in-store home entertainment offering resulting in fewer shelves for video products, particularly catalogue titles. The retailer is now focusing on new release, as well as family and children’s titles.
  • Former Blockbuster subsidiary in Denmark, rebranded to RecycleIT, is now focusing on consumer electronics.
  • Music and video specialist retailer Stereo Studio has begun selling clothes in a move to diversify away from disc-based entertainment.

While Denmark is the first to experience a decline in distributor revenues from video retail in excess of 50%, all four Nordic countries are experiencing steep declines in physical video sales. The immediate result of this is that in 2014 physical and digital video platforms will approach the long awaited digital cross-over; the point when consumer spending on digital video platforms exceed spending on video discs. The share of overall spending on discs will have fallen to 54.5% by the end of 2014: as a result, in 2015 digital video will overtake discs as the largest combined area of home video spending in the region.

 

Organization
Netflix
Research by Market
Media & Advertising
Category
Video
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