Home-Video Spending

Fast-growing Internet services like Netflix Inc. (NFLX), online movie purchases and DVD rentals from Redbox kiosks lifted U.S. home-video spending in the third quarter, countering the continued drop in DVD sales.

Total sales rose 0.2 percent to $3.94 billion, the industry-backed Digital Entertainment Group said today in an e- mailed statement. Revenue from subscription streaming more than doubled while online purchases of movies and TV shows rose almost 38 percent, the group said.

Hollywood studios are counting on digital sales and pay services like Hulu Plus to bolster revenue and replace shrinking DVD spending as more consumers watch videos online from televisions and smaller devices. Sales rose 1 percent year to date to $12.3 billion, the association said.

"The growth businesses are all growing consistently, month after month," Ron Sanders, president of Time Warner (TWX) Inc.'s Warner Home Video, said in an interview. "They're starting to offset the downturn we've seen previously."

The major studios and electronics companies are backing UltraViolet, a service to let consumers purchase a film or TV show and watch from a variety Web-linked devices. Studios are working to entice more retailers to participate in the service, according to David Bishop, president of Sony Pictures Home Entertainment.

"We're on the verge of increasing the retail base," Bishop said in an interview. "We need more in the market and will have more in the market. That will help the ownership concept among consumers."

Streaming Accord

Time Warner Inc.'s Warner Bros. yesterday announced an agreement to provide films to Redbox Instant, a new online venture by Redbox owner Coinstar Inc. (CSTR) and Verizon Communications Inc. (VZ) Last month, the pay television channel Epix reached a deal to sell and rent movies through Amazon.com Inc.'s Amazon Prime service.

Third-quarter sales from subscription streaming soared to $579.2 million, the DEG said. Sales of electronic copies of films and television shows rose to $187.1 million. Kiosks rentals, a category led by Redbox, rose up 9.9 percent to $454.8 million.

Sales of physical disks dropped 4 percent to $1.67 billion for the quarter, the DEG said.