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DEG: Home Entertainment Saw Q1 Decline

5/02/2011 12:00:56 PM Eastern

Los Angeles, Calif. - Spending on home entertainment in the
United States over the first quarter of 2011 was down 9.8 percent from the
year-ago period, according to a new market report from the Digital Entertainment Group (DEG).

The group attributed the decline, in part, to a 25 percent
reduction in box-office revenue for titles that became new release offerings for
the home in the period.

Title sell-through sank 18 percent for the quarter, but those numbers
were impacted in part by the fact that the Easter holiday, which is a revenue
generator for disc sales, was not part of first quarter counting this year.

On a positive note, sell-through for the second quarter has
started on a positive note, up 20 percent in the first few weeks of the period.

For Blu-ray Disc software sales, consumer spending was up nearly
10 percent over the same period in 2010. Blu-ray 3D software is also beginning
to show signs of material growth, with anticipated retail sales of more than
$100 million for the year, the DEG said.

Additionally, Blu-ray Disc hardware increased, with sales
(inclusive of BD set-tops, PS3s and HTiBs) up more than 13 percent over first
quarter 2010.

This brings total household penetration of all Blu-ray compatible
devices to nearly 30 million U.S. homes, according to DEG research.

Nearly 7 million HDTVs were sold to U.S. consumers in the first
quarter of 2011, up 11 percent over first quarter of 2010.

HDTV penetration life-to-date is more than 64.5 million U.S.
households.

The DEG said emerging formats such as digital distribution
provided additional growth for the industry with electronic sell-through spending
up nearly 11 percent and consumer spend on VOD up 9 percent in the quarter. In
total, digital movie transactions were up close to 10 percent over the same
period last year.

The home entertainment business continued to evolve in the period
with increased enhancements to technologies like Blu-ray Disc, Blu-ray 3D and
new digital service offerings appearing in CE devices.

The DEG said all of the factors are aligning for continued strong
demand for home entertainment options offering value and convenience.

"Amid the macro-economic challenges we face, the DEG expects a
number of growth opportunities for the remainder of 2011, fueled by an
impressive array of blockbuster theatrical releases in the third and fourth
quarters," stated Amy Jo Smith, DEG executive director. "This will help the
industry to round out 2011, with consumer spending flat, or up slightly, and
transactions up by the end of the year."

Q1-2011
U.S. CONSUMER SPENDING AND TRANSACTIONS BY FORMAT
         
           
U.S.
Consumer Spending 
  Q1 Q1 % Chg
($ in millions) 2010 2011 YOY
       
Sell-Thru Packaged Goods  $        2,584.80  $2,068.03 -19.99%
Sell-Thru (including EST)  $        2,712.09  $2,208.61 -18.56%
       
Rental:      
Brick and Mortar Rental  $            688.96  $   440.00 -36.14%
Subscription (physical and streaming)  $            523.00  $   695.82 33.04%
Kiosk  $            281.14  $   367.79 30.82%
Total Rental (including streaming,excluding
VOD)
 $        1,493.10  $1,503.61 0.70%
Total Rental (including VOD)  $        1,928.45  $1,976.83 2.51%
       
Digital:      
Electronic Sell-Thru  $            127.29  $   140.57 10.44%
VOD  $            435.34  $   473.23 8.70%
Total Digital  $            562.63  $   613.80 9.09%
       
Total U.S. Home Entertainment Spending  $        4,640.53  $4,185.44 -9.81%