'Avatar' DVD Sales Are Out of This World: Is It the Last Hurrah for Discs?

Hollywood has been sitting a death-bed vigil for DVDs for a long time now. Once a ridiculously high-margin, fat-profit business, sales of discs have tumbled hard over the last few years. The decline has been so severe and so rapid that many industry watchers say the technology is waltzing toward extinction -- and some think it could happen as early as this year.

While it seems a little morbid (and premature) to call the demise of DVDs by year's end, studios have good reason to worry. DVD sales fell nearly 7% in 2008, according to information firm SNL Kagan, and in 2009, the decline in DVD sales has been pegged at 13% by Adams Media Research.

Despite those grim numbers, however, at least one movie is selling furiously, regardless of the format. Avatar sold 2.7 million Blu-Ray discs and 4 million DVDs in the four days after it hit shelves on April 22, generating roughly $130 million in revenue. This comes more than three months after the movie's theatrical release and more than two months since high-quality pirated copies became available on file-sharing sites, The Blu-Ray sales of Avatar are poised to topple the previous record set by The Dark Knight, which has sold 2.9 million Blu-Ray discs since December 2008.

Ironically, Avatar's DVD release happened to coincide with the slowest box office weekend of the year, in which U.S. movie ticket sales totaled an estimated $100 million, or 23% below Avatar DVD sales. (As an odd side note, ticket sales of Avatar enjoyed a modest boost after the DVD was released.)

"People Aren't Building DVD Libraries Anymore"

Although one could argue that the success of Avatar on DVD proves that moviegoers will indeed buy discs, at least one analyst thinks this disc-buying frenzy is a one-time freak event that may not hold much significance beyond its weirdness.

"Avatar is really one of those once-in-a-blue-moon films that everyone is excited about and interested in. Titanic was probably the last movie to do that and that was in 1997. It's an anomaly. I expected the movie to do well on Blu-Ray," says Wade Holden, an analyst at SNL Kagan. Once Avatar DVD sales dry up, the market for DVDs is likely to return to its anemic norm, says Holden.

"People aren't building DVD libraries anymore. They aren't going back and buying old titles [on DVD] ... And I think one area where you're really going to see a huge effect early is in the rental business. You could see more people rent movies on-demand through their cable provider. It's an easy, one-off transaction," says Holden.

But until broadband and storage technology has advanced enough to make digital distribution of movies easy and efficient for most Americans, DVDs aren't going anywhere.

"It's going to be a long time before DVDs go away," says Holden. "I'd say it will be another 10 years' time. Fortunately for the DVD, there's a lot of technology catchup involved with digital distribution. Right now, it takes half a day to download a Blu-Ray-quality film. If a collector with a large library of DVDs were to convert that library to digital, those DVDs have terabytes and terabytes of information. You would need to have fiber to the home and a way to download movies in a reasonable amount of time to make that work."