Los Angeles - Consumer spending on DVDs, Blu-ray discs and digital distribution dropped 3.3 percent to $8.8 billion for the first half of 2010 compared with the same period last year, according to midyear figures released Monday by the Digital Entertainment Group (DEG).

However, consumer spending on home entertainment products was up 2.3 percent in the same period, the group said.

The DEG, whose members comprise companies in the video software and hardware industries, said that spending for home entertainment was nearly flat, down only 0.7 percent, in the second quarter compared with the same period in 2009.

Blu-ray Disc sales and rentals continued to be strong, achieving a combined $982 million for the first half of the year.  Blu-ray Disc sell-through was up 84 percent to $733 million at the midyear point compared with the same period last year, according to the DEG.

Blu-ray Disc sell-through also grew a 112 percent in the second quarter, to $363 million, compared with second-quarter 2009.

However, overall packaged-media sell-through, which includes DVD and Blu-ray Disc, declined 7.1 percent in the first half of the year compared with the same period last year. In the second quarter, packaged-media sell-through declined only 3 percent compared with second quarter 2009.

The group reported that digital distribution maintained a steady rise with electronic sell-through (EST) up 36.9 percent to $285 million and video-on-demand (VOD) up 19.1 percent to $865 million in the first half of the year, a combined growth of 23.1 percent to $1.1 billion, surpassing the $1 billion mark for the first time for a six month period.

Blu-ray Disc hardware sales continued to climb in the first half of the year, selling almost 2 million set-top units, an increase of 103 percent over the same period last year.

This brings the total installed base of Blu-ray Disc playback devices in the U.S. to 19.4 million units, according to the DEG.

"The growth of Blu-ray, both hardware and software, continued to dominate the home entertainment landscape in the first half," said Ron Sanders, DEG president and president of Warner Home Video. "Clearly, we are still grappling with a challenging marketplace and a tough economy, but overall the trends that we are seeing are encouraging."

According to Rentrak Home Video Essentials reporting, rental spending was down 4.9 percent to just less than $3 billion in the first half of 2010. The DEG said the overall market continues to be hindered by the Movie Gallery store closures, although kiosk rental revenue was up 55 percent in the first half of the year.

The DEG compiles quarterly sales data based on input from member companies, retailers and industry association tracking sources.

In other first-half findings: Blu-ray Discs shipped to retail in the first half of 2010 topped 77 million, up 98 percent over the comparable period in 2009, according to figures compiled by Swicker & Associates on behalf of the DEG.

Household penetration of all Blu-ray Disc-compatible devices, including set-top players, PC drives and PlayStation3 consoles, has now reached 19.4 million U.S. homes.

A total of 79 million HDTVs have sold to consumers cumulatively to date, according to figures compiled by the DEG based on data supplied by the Consumer Electronics Association, retailers and manufacturers.

With some 8.5 million HDTVs selling in the first half of the year, U.S. household penetration is at approximately 51.32 million, the DEG said.

Approximately 8.7 million DVD players sold to U.S. consumers in the first half of 2010, according to DEG reports. 

Since launching in spring 1997, some 284 million DVD players -- including set-top and portable DVD players, home theater in a box systems, TV/DVD and DVD/VCR combination players -- have sold to consumers, bringing the number of DVD households to approximately 91 million (adjusting for households with more than one player).

The DEG estimates that some 68 percent of DVD owners have more than one player.