Market Insight

Retail video value declines in Japan despite BD growth in 2015

February 16, 2016  | Subscribers Only

David Scott David Scott Associate Director – Research and Analysis, Service Providers & Platforms
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  • Total retail video revenue down 2.7%; shipments down 13.3% in 2015
  • Retail BD value up 3.2%, units shipped down 3.6% 
  • Retail DVD value down 19.4%; DVD shipments down 9.2%
  • Results outperformed expectations and adjustments have been made to full-year 2015 figures

Distributor revenues from retail Blu-ray Disc (BD) sales climbed 3.2% in 2015 despite a 3.6% decline in unit sales, according to IHS analysis of 2015 results from the Japan Video Software Association (JVA). Revenues rose to ¥89.7 billion ($741 million) helped by a 7.1% increase in the average trade price of a BD compared with the previous year, after JVA members shipped nearly 18.2m BD units to the retail market. 

Retail DVD unit sales and value declined 19.4% and 9.2% respectively in 2015 compared with a year earlier, generating revenues of almost ¥72.8 billion ($602 million) for distributors from the shipment of nearly 24 million units. The severity of the decline in value terms would have been worse without a 12.6% increase in the average trade price of a retail DVD over the period. 

Total retail shipments from the combined BD and DVD formats declined 13.3% to just under 42.2 million units whilst revenues fared better declining 2.7% to nearly ¥163 billion ($1.3 billion). 

As a result of the increase in average prices, the figures outperformed expectations. IHS has revised downward its retail BD shipment figure for 2015 from 20.7 million to 19.5 million, revenues have been increased from ¥94.4 billion ($780 million) to ¥96.5 billion ($797 million) on the back of an increase in the average trade price of a BD to ¥4,938 ($40.80). Similarly, IHS has made adjustments to our retail DVD volume and value full-year figures for 2015 in light of the JVA results. Retail DVD shipments have been revised downward from 29.4 million to 28.9 million whilst annual revenues from the sector increase from ¥84.2 billion ($696 million) to ¥89.9 billion ($743 million). This reflects IHS analysis of the JVA data grossed up to reflect the total market. 

At consumer level, IHS has revised upward its total consumer spending on retail video software figure from ¥189 billion ($1.6 billion) to ¥198 billion ($1.6 billion) for full-year 2015, whilst the number of disc purchases in 2015 declines from 42.3 million to 40.9 million. This represents an 8% and 17% decline in total consumer retail video spending and unit sales respectively in 2015 compared with a year earlier. 

 

Our analysis:

The decline in Japan's always fragile retail video sector continues as fewer and fewer consumers opt to purchase discs to fulfil their entertainment needs. Instead, an increasing number are turning to digital video services from Google, Amazon, NTT, Hulu Japan and, most recently, Netflix, which launched its subscription video-on-demand (SVOD) service in Japan on 1 September 2015.  

Economic and environmental conditions also contributed to the decline in consumer spending on retail video software in 2015. Despite an improvement in economic conditions in H1 2015, consumers were conservative in their spending in the second half of 2015 due to sluggish wage growth. In addition, unusually warm temperatures limited seasonal purchases such as the buying of a DVD during a wet week for home viewing. 

However, an upturn in consumer spending is likely to come from an increase in purchasing power in 2016 due to recent declines in energy prices. Furthermore, the planned increase in Japan’s consumption tax from 8% to 10% in April 2017 is expected to boost household spending in 2016 prior to a dampening of activity once the tax takes effect, according to IHS' Economics & Country Risk service.  

Meanwhile, the flow of revenue during the year continues to remain steady for distributors. Returns are slightly greater in the second half of the year with distributors receiving nearly 54% of total revenues from the retail video sector over this period, according to IHS analysis of the year-end 2015 data released by the JVA. In terms of formats, DVD accounted for 57% of total units shipped to the trade in 2015 but the reverse is true in terms of revenue generation. The BD format generated 55% of total revenues from the retail video sector in 2015, reflecting the premium prices commanded by the hi-def format.

Geography
Asia Pacific Japan
Research by Market
Media & Advertising
Category
Video
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