By Ben Fritz 

Hollywood's home-entertainment business is headed in the wrong direction again.

After two years of modest growth, total U.S. revenue from in-home viewing of movies dropped 1.8% to $17.8 billion in 2014, according to new data from the Digital Entertainment Group trade association.

Last year's drop was driven by continued declines in sales and rentals of physical DVDs along with a surprising drop in video-on-demand rentals. After many years of growth, VOD rentals from cable, satellite and Internet providers fell 6.7% to $1.97 billion last year.

"The VOD market is so big and important....It's critical that we get it growing again," said Ron Sanders, president of home entertainment for Time Warner Inc.'s Warner Bros.

Among the changes that could boost VOD, Mr. Sanders said, are simpler user interfaces and more options to rent and watch movies on portable devices.

Home-entertainment revenue grew less than 1% in 2013 and 2012 after dropping the prior seven years--a trend that put a major dent in the bottom lines of studios.

Studio executives attributed the overall drop in 2014 home-entertainment revenue in part weak results at the domestic box office last year. If movies weren't popular in the theater, there will be less demand to watch them at home.

As reported, overall North American box-office receipts for 2014 declined more than 5% to $10.35 billion from $10.92 billion in 2013, according to box-office tracker Rentrak Corp.--the worst results since 2011. Attendance for 2014 was also down, but final data on ticket sales for the year isn't available yet.

DVD and Blu-ray sales dropped 11% from 2013, as consumers continued to abandon physical media. Kiosk rentals, a business dominated by Outerwall Inc.'s Redbox, fell 4%, reflecting that company's recent struggles as it has run out of lucrative new locations and has lost customers to digital competitors.

The best news for the movie industry was 30% growth in digital sales, to $1.551 billion. Sales of films from online retailers such as Apple Inc. and Comcast Corp. are the most profitable type of home entertainment transactions and a category studios have focused intently on growing.

To boost digital sales, studios regularly release movies for online sales before the DVD and VOD launch date. Comcast's Universal Pictures set a new industry record by offering its Seth Rogen comedy "Neighbors" online six weeks before it was available on disc.

"I would have liked to see growth, but when you consider the weaker slate and that we are driving growth in the most profitable transactions, I think overall it's a pretty good picture," said Mr. Sanders.

Walt Disney Co.'s " Frozen" was the most popular home- entertainment title of 2014, according to the DEG, followed by Lions Gate Entertainment Corp.'s " The Hunger Games: Catching Fire," Warner Bros.' " The Lego Movie," Warner's " The Hobbit: The Desolation of Smaug" and Disney's " Guardians of the Galaxy."

Access Investor Kit for Comcast Corp.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US20030N1019

Access Investor Kit for Comcast Corp.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US20030N2009

Access Investor Kit for The Walt Disney Co.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US2546871060

Access Investor Kit for Time Warner, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US8873173038

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Time Warner (NYSE:TWX)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Time Warner Charts.
Time Warner (NYSE:TWX)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Time Warner Charts.