DVD Slump Might Weaken 'Half-Blood Prince' Sales

Though the 'Harry Potter' films have been huge DVD sellers, each sequel has sold fewer units than its predecessor -- and raised the bar of profitability that much higher for Warner Bros.

Harry Potter, the teen wizard whose films have generated billions of dollars and become one of Hollywood's biggest franchises, is known for battling the evil Lord Voldemort. Now he's about to confront an even darker foe: A soft DVD market.

"Harry Potter and the Half-Blood Prince," the sixth installment in the Warner Bros. film series, will be released July 15, and expectations are that it will be one of the year's biggest blockbusters. The previous five "Potter" movies have generated $7.2 billion in worldwide box-office and DVD sales, reaping huge profits for the studio and Potter's creator, author J.K. Rowling.

But the movie world that "Half-Blood Prince" will enter is markedly different from the one that its predecessor, "Harry Potter and the Order of the Phoenix," faced when it was released in 2007. Over the last two years, DVD sales, which have long propped up the movie business, have sharply declined. The slump in the DVD market has undermined Hollywood's business model and cast a shadow over what used to be the industry's bright spot.

"There's been a fairly substantial shrinkage in the overall DVD market since the last 'Harry Potter' film came out," said Tom Adams, a home video industry analyst. According to Adams, DVD sales were down 9% in 2008 and he's projecting that they will fall an additional 8% in 2009.

"That puts much more performance pressure on these big franchise titles to succeed," he said.

Though the "Potter" movies have historically been huge DVD sellers, each successive sequel has sold far fewer units than its predecessor. Sales of the last release were off 15% in the first eight weeks compared with sales of the first film during the same time span. Even a small decline in DVD sales is a challenge for expensive movies because it raises the bar to profitability that much higher.

And the bar for Harry Potter is higher than ever. Warner Bros. spent $250 million to produce "Half-Blood Prince" and will invest $155 million to market and distribute the movie, according to people familiar with the situation.

Compared with other big-budget sequels, the incremental costs for each "Potter" film have been moderate, mostly because of salary increases for cast members and unfavorable foreign exchange rates. For example, when Warner Bros. began shooting "Half-Blood Prince" outside London in September 2007, the dollar was so weak against the British pound that it added roughly $15 million to the production cost...

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(SOURCE: LA TIMES)