iTunes hurting DVD sales? “Pirates” say no

December 8, 2006

Apple CEO Steve Jobs introduces movie downloads in San Francisco For all the talk of digital downloads ridding the planet of physical products — the CD, the DVD the Game Cartridge — here’s a sobering fact: Disney sold 5 million DVD copies of “Pirates of the Caribbean: Dead Man’s Chest” in its first day in release this week. That comes on top of Disney-Pixar’s “Cars” selling 13 million DVDs sold since its Nov. 7 release, 
Both movies are on sale for download at iTunes, the mecca of downloads for iPod users, and the AppleBlog wonders if these robust DVD sales — which can account for as much as half of a movie’s total revenues and a nice chunk of their profit — will inspire other studios to open the vaults and offer more films on the service.
Several comments on the blog expressed surprised that downloads draw much attention at all, since DVD packages tend to be higher quality and packed with extra features — for about the same price.
For their part, Disney says downloads don’t threaten its $3 billion DVDs business, noting that it will reap $25 million from downloads in its first year of offering the service. Speaking at a UBS media conference this week, Disney CFO Tom Staggs said, “Every sign we see is it’s market expanding and not cannibalizing (home video sales).”
Perhaps the whole digital download business isn’t all that big for now. Forrester Research analysts Josh Bernoff and Remy Fiorentino, in Bernhoff’s blog, crunched Apple’s user data and reached the conclusion that the median household spent less than $20 every 12 months on iTunes, and the top 34 percent of iTunes users account for 80 percent of the purchases. Forrester added:
Since iPods went on sale, people are consistently buying about 20 iTunes per iPod. There’s been a small uptick to 23 lately, but that’s it. What’s the explanation? It’s either:  
– People are buying at a low but steady rate, but replace their iPod every few years — which would imply that iPod user market is growing more slowly than it appears, or
– People buy about 20 songs and then get tired and don’t buy any more.
Or, both are true. Either way, this accounts for a little tarnish on the incredible iTunes success story…

What do you think? Done with CD shops? Watch a lot of movies via download? 

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