Home entertainment was actually down 8% in 2014, analyst says

The home entertainment business is off much more than a research consortium formed by the major studios has let on.

Last week, that consortium, the Digital Entertainment Group, reported a narrow 1.8 percent decline in the business of renting and selling movies and TV shows through home entertainment channels, to around $17.8 billion.

However, on Monday, media investment analyst Michael Nathanson published a note saying that the decline the erstwhile video business was actually much greater--more like 8 percent--since the DEG was improperly using SVOD data in its calculations.

Using SVOD revenue stats is a "red herring," Nathanson states, since a major chunk of it comes from TV programming, which is already accounted for by conglomerate TV divisions under the heading "syndication." The home aftermarket of movies, Nathanson argues, is home entertainment's main currency.

Further, he argues that DEG never tabulated SVOD revenue from platforms like HBO or Showtime, so why should it start with Netflix (NASDAQ: NFLX), Amazon (NASDAQ: AMZN) and Hulu?

Nathanson says SVOD is actually the principal cause of home entertainment's woes, which he says are accelerating. The 8 percent decline was twice the drop experienced in 2012, the analyst points out.

Physical home entertainment sales were down 11 percent to $6.9 billion, while disc rentals declined 14 percent to $3.3 billion, according to Nathanson's calculations.

Digital rentals and sales of movies and TV shows spiked 16 percent to $7.5 billion in 2014, but slowed from a growth rate of 24 percent in 2013.

Time Warner Inc. has the biggest exposure to the declining home entertainment market, with 10 percent of its revenue coming from that sector.

For more:
- read this MoffettNathanson report (sub. req.)
- read this MediaPost story

Related links:
Online movie sales jumped in 2013
VOD revenue drops to $1.97B in 2014, reversing positive growth trend
SVOD to outpace DVD sales in 2015, analyst says