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Disc maker Cinram could feel impact of DVD holiday sales slump

Disc maker Cinram could feel impact of DVD holiday sales slump

1 day ago

TORONTO - A year-long slowdown in DVD sales continued into the holiday season as lagging results overcame a rush of major studio blockbusters, news which could prove troublesome for Canadian disc manufacturer Cinram (TSX:CRW.UN) which has been struggling to shift away from disc sales to drive its results.

"While general DVD sales have been slipping, they (the Hollywood studios) were really hoping that the fourth quarter was going to make up for the huge deficit in the comparable sales for the year," said Jan Saxton, vice president and analyst at Adams Media Research, a California-based entertainment data firm.

According to Saxton's preliminary estimates, the year 2007 will go down in history as the period that DVD sales began to lose their steam.

Consumers spent nearly $15.7 billion on DVDs in 2007, lower than the $16.3 million logged in the prior year, Saxton estimated. It's the first time the digital discs have shown a downturn in popularity since their inception.

"That's a major disappointment to the studios and probably to the replicators as well," she said.

Last month the Cinram International Income Fund announced that it would suspend distributions to unitholders after the December payout due to a shorter demand for its discs and the affects of a higher loonie over the U.S. greenback.

The revelation was a complete reversal of comments made in August by Cinram chief executive Dave Rubenstein predicting that the Christmas shopping season would save their weakening results.

"Excluding any new business, we expect a slight increase in DVD volumes for the year, the impact of which will be offset by lower average selling prices," he said.

A receptionist at Cinram said Wednesday that none of the executives were available to comment on Wednesday because they were out of the office.

The company's shares suffered a major downturn last year, dropping an astounding 75 per cent, as it shuffled operations to focus less on discs and more on securing unrelated deals for its operations.

Cinram had started off the year at $22.95 per share and closed it out at $5.74.

On Wednesday shares ended the day up 17 cents to $5.91 on the Toronto Stock Exchange.

Studio executives had been pegging the holiday line-up as the biggest in history because it was loaded with movies that helped push 2007 towards record results at the box-office. Such a strong slate theoretically should've sent discs flying out of the stores.

As summer turned to fall, a slew of major blockbusters were lined up for the final weeks of the year, including "Fantastic Four: Rise of the Silver Surfer," "Spider-Man 3" and "Ratatouille." All of those fell short of sales projections.

Only a few emerged as big sellers, most notably "Transformers," "The Simpsons Movie" and "Harry Potter and the Order of the Phoenix."

Saxton said that usually studio heads spend the holiday sales period boasting about titles that sold massive numbers and broke both first-day and first-week sales records.

"Those have been eerily absent in this holiday quarter," she said.

The muddled climate of the entertainment industry reached a major turn in 2007 as a rash of problems related to the technological shift in consumer attitudes began to show its impact.

For another consecutive year CD sales slid - this time more than 20 per cent - between the U.S. Thanksgiving holiday and Christmas Eve, according to results from Neilsen Soundscan. Shoppers continue to turn towards downloading music legally as opposed to buying copies at stores.

"It's clear that DVDs are starting to follow CDs by perhaps a five-year gap as far as dropping in popularity as more and more people can do video-on-demand," Richard Doherty, an analyst with the Envisioneering Group in New York.

In Canada, services offered by cable companies such as Rogers Communications (TSX:RCI.B) offer a wide variety of content, both free and for a charge, directly from set top boxes. Viewers who use the service can watch music video countdown shows and programming from popular cable channels instead of buying DVDs. Pay television services now also allow for pausing and rewinding shows.

The introduction of the TiVo digital video recorders into Canada in December gave viewers another way to record live TV for viewing on weekends when they might otherwise buy a movie.

"In the winter months electronic on-demand becomes a lot more attractive than bundling up and going down to the rental store or the retail store," Doherty said.

Hollywood has been trying to plug the leak of dwindling sales numbers with two competing high definition formats, both Blu-Ray and HD DVD.

The head-to-head competition between the incompatible formats - both which require separate disc players - appears to have evoked memories of the VHS and Beta format war of the early 1980s in the minds of consumers.

So far neither has emerged as a definitive victor and sales have fallen short of initial projections, though they haven't been all together disappointing.

Disc manufacturers can find some solace in results from the European market. Estimates from analysis firm DEG Europe suggest that sales grew by about eight per cent in volume and 0.6 per cent in value during 2007.

Last year Cinram used a multi-year supply agreement with cellphone company Motorola Inc. as a springboard for future expansion outside of disc manufacturing.

The agreement has the company packaging and delivering phones and accessories to the North American market.

Motorola faced its own problems in the back half of the year when sales of the Razr2 phone dwarfed the booming results of its predecessor model.

| 发布时间:2011.03.10    来源:    查看次数:893
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