Executive Summary

In 1999, the UK market for video retail and hire was valued at £1.44bn, having fallen by 5.7% from the unusually high figure of £1.52bn achieved in 1998. Prior to 1998, annual growth was around the 3% to 4% mark. However, the market increased by 11.3% in 1998, due to the arrival of the digital versatile disc (DVD) format, and the record-breaking sales achieved by the `Titanic' and 'The Full Monty' videos.

Video retail is the largest sector of the market, with a share of around 61.5% in 1999. However, video hire also benefited during 1998, when growth outstripped that for video retail. The market for blank videos has remained virtually static for a number of years.

The major Hollywood film studios maintain a considerable influence over the video retail and hire market. Although minor changes have occurred in recent years, the 'windows' concept (i.e. carefully scheduled timing of the release of certain videos) retains its importance. Companies such as Warner Brothers, Walt Disney and Twentieth Century Fox still dominate the market — a trend which shows no sign of slowing, especially since the impending merger between Time Warner and AOL may open up new channels of distribution. Nevertheless, 1999 also witnessed some major changes in the supply side of the market, as Warner split with MGM, and the joint venture between Paramount and Universal ended.

Retailing of video software is mainly concentrated in the hands of large mixed retail businesses, together with the major supermarket groups, which have recently been increasing their share of the market. Many of these groups now sell video software online, partly to counteract the threat posed by the growing influence of `e-tailers' (electronic retailers) such as Amazon, which now operate within the market. The share of the video hire market taken by independents has fallen in recent years, as multiple operators such as Blockbuster have begun to consolidate their position.

The market is forecast to increase by 94.6% in the years between 1999 and 2004 (to reach £2.79bn). This will be driven mainly by the growing household penetration of DVD players, a sector which will show the highest level of growth. This period will also witness concepts such as video-on-demand (VoD) entering the market, which are designed to offer greater choice and convenience to the end-user. However, market growth will remain dependent on which titles are released during the course of the year, for both the retail and the hire sectors. Online shopping will continue to increase, although some of the present website operations may not survive beyond the short term.

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