VIDEO SEES 'MONSTER' 2002 SALES DVD BOOM SPARKS PROFITS.

Byline: Greg Hernandez Staff Writer

The booming home-video industry had a record year in 2002 with rentals and sales of DVDs and VHS tapes combining for revenues of $20.6 billion, according to preliminary figures released Wednesday by the Encino-based Video Software Dealers Association.

Last year's revenues increased nearly $2 billion from 2001, fueled mainly by the rapidly growing DVD format, which also set a sales record and made major inroads in the rental arena still dominated by VHS.

``After more than 20 years, the industry is still growing and it's satisfying consumers so completely,'' said VSDA President Bo Andersen. ``I'm especially enthusiastic about the (sales) numbers. People certainly are showing that they like building a home video library.''

The VSDA's sales figures are based on number of copies shipped to retailers rather than the number actually sold with research conducted through mid-December.

DVD sales were expected to reach $8 billion, up from $5.3 billion in 2001. Overall, video sales should reach $12.4 billion in 2002 with DVDs accounting for 65 percent of that total.

The trend of consumers buying increasing numbers of popular movies in the DVD format delivered a 3 percent dent to the rental market as people have clearly begun to prefer owning movies like ``Monsters, Inc.,'' ``Spider-Man'' and ``Harry Potter and the Sorcerer's Stone'' instead of renting them.

``I think the DVD growth has surpassed even the most aggressive prognosticators,'' said Bob Chapek, president of Disney's Buena Vista Home Video. ``The reasons are that DVD has now hit the mainstream and is appealing to the mass market of families that have always driven the (sales) in VHS business and the fact that the DVD has such unique benefits that is causing people to buy in consumption rates much higher than VHS has ever seen.''

Chapek, who is also president of the DVD Entertainment Group, an industry trade association, said the average household now buys 15 DVDs per year, compared with five VHS movies per year.

Buena Vista Home Video also released its 2002 home-video sales figures Wednesday, with its ``Monsters, Inc.'' taking honors as the year's top seller, moving a combined 21 million copies in DVD and VHS.

While ``Monsters'' was the top-selling VHS, followed by Warner Home Video's ``Harry Potter and the Sorcerer's Stone,'' the top-selling DVDs were Warner's ``The Lord of the Rings: The Fellowship of the Ring,'' followed closely by Columbia Home Video's ``Spider-Man,'' according to the numbers compiled by Disney.

Warner Home Video led all competitors with 21.7 percent of the market share (sales and rentals), followed by Buena Vista (18.2 percent) and a tie for third place between Columbia and Universal Home Video (11.8 percent). Rounding out the top five was Fox Home Video with a 10.3 percent market share.

The VSDA's figures showed that rentals of VHS movies dropped by 25 percent last year to $5.3 billion, causing a shrinkage in market share for VHS to 65 percent compared with 83 percent in 2001.

``In my view, the rental numbers are still very strong,'' Andersen said.

That rental strength came from DVD with rental revenue in that format climbing to a record $2.9 billion, a whopping 106 percent increase from $1.4 billion in 2001. The DVD share of the rental market increased from 17 percent in 2001 to 35 percent in 2002.

While movies that were blockbusters at the box office dominated the sales charts, the top-renting movies were more modestly successful titles such as ``Ocean's Eleven,'' ``Training Day'' and ``Don't Say a Word.''

Blockbuster, Inc., the nation's largest film-rental chain, has suffered from the DVD sales trend, with major retailers such as WalMart and Best Buy offering new-release DVDs for rock-bottom prices. As a result, Blockbuster last month was forced to slash its profit forecast when holiday DVD sales skyrocketed and rentals slumped.