The Cost of Having Fun - Spending On Compact Discs And Dvds

In 2003 Americans spent more on digital videodiscs (DVDs) than they did on compact discs (CDs) for the first time ever. According to the "2003 Consumer Profile" released by the Recording Industry Association of America, manufacturers shipped sound recordings with a retail value of $11.9 billion during the year, down from $12.6 billion in 2002 and $13.7 billion in 2001. (See Table 4.9 in Chapter 4.) The decline in sales was attributed to the impact of illegal Internet file-sharing, as well as the increasing competition for entertainment dollars that had led retailers, and some manufacturers, to reduce prices.

A consumer survey performed in 2004 by the NPD Group found that one-third of respondents cited price as an "important" or "very important" factor when deciding to buy a CD. The average price of CDs was in fact dropping, from $13.79 per disc in the first quarter of 2003 to $13.29 in the first quarter of 2004, according to NPD.

A growing number of music consumers were also downloading music online legally via such Web sites as Apple's iTunes and the relaunched Napster.com. By mid-2004 each offered more than 700,000 licensed songs, which were available from iTunes for ninety-nine cents each or from Napster via a $9.95 monthly subscription.

Purchases of DVDs, meanwhile, were growing dramatically, with retail sales in 2003 topping $12 billion, according to the Video Software Dealers Association. This was up $3.9 billion, or 46%, from 2002. An additional $4.3 billion was spent on DVD rentals, an increase of 53% over 2002. While many DVDs were rented from such chains as Blockbuster or Hollywood Video, growing numbers were obtained from online vendors such as Netflix and Walmart.com, which, for a monthly fee of approximately $20, allowed users to borrow an unlimited number of discs provided they kept no more than three at a time.

At the end of 2003 the average retail price of a DVD was $20.21, while the average video store rental cost just $3.20, according to the Video Software Dealers Association. Americans bought seventeen discs per DVD player during the year, a nearly threefold increase over the highest reported rate for video cassettes of six per player in 1996.