The DVD edition of the Star Wars: Episode 1 -- The Phantom Menace managed to sell some 2.2 million copies during its first week, racking up $45 million in retail sales and setting a new record for first week sales of a DVD.  Just two weeks ago The Mummy Returns DVD had set a new record with sales of 2 million units during its first week and many insiders predict that Shrek, which is on sale on November 2nd or Dr. Suess's How The Grinch Stole Christmas, which is coming out November 20th, will break The Phantom Menace's new record. Disney's Snow White & The Seven Dwarfs DVD, which had a heavily promoted pre-release offer that gave customers a free DVD for preordering, recently set a record for first day sales (see 'Snow White DVD Dwarfs Them All').  The inescapable conclusion that one must draw from this recent rash of record-setting performances is that the market for DVDs is very elastic and is able not merely to absorb an avalanche of imposing new releases -- this market positively gorges on these goodies.


Sales for the Phantom Menace DVD are all the more impressive since it has been almost three years since the film was released and eighteen months since the VHS edition hit the market. The Phantom Menace DVD overcame these obstacles with the help of heavy TV and print promotion and by providing consumers with loads of extra value-added features that are exclusive to the DVD, including seven scenes that were planned but not included in the film in its theatrical or VHS release.  The two-disc Phantom Menace DVD includes a gargantuan 480 minutes of content, which (along with the improved picture and sound versus VHS) helps explain this new medium's increasing popularity.


Since the movie studios' profit margins are higher on DVDs than on anything else they produce or rent, the burgeoning sales of DVDs are a huge boon to the industry.  MGM recently recorded all-time record results for the third quarter (they were wiped out by a change in accounting procedures, but what the heck, earnings are earnings).  This record-setting performance was primarily driven by a 35% increase in Home Video revenue.  MGM recorded a 200% increase in the sales of DVDs for the third quarter, a gain that was largely the result of the release of the Hannibal DVD.  Of course Hannibal has been MGM's number one film this year, but it is interesting to note that studio fared better during the quarter that the video and DVD were released, rather than during the quarter in which the film was released theatrically.  With the increasing importance of DVD revenue to the studios, we can expect more advertising of new releases and more promotions to spur sales and set new records.  The increasing promotion of new releases and the steady growth in the sales of DVD hardware have both fueled the present boom in DVD sales.  This market is unlikely to plateau until sales of new DVD players decline substantially from their present levels (see 'Number of DVD Players Doubling in 2001').