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VSDA’s Annual Report on Home Entertainment Industry Provides Overview and Analysis on the DVD, VHS, and Video Game Markets

ENCINO, Calif, July 25, 2005 — The Video Software Dealers Association (VSDA) today released its 2005 Annual Report on the Home Entertainment Industry. The report details the growth of DVD in both consumer spending and breadth of product as home video continues to be consumers’ preferred choice for viewing the latest hit movies. This report provides a comprehensive overview and analysis of the home entertainment industry for the year 2004, covering such topics as home video’s financial contributions to the entertainment industry, VHS and DVD sales and rentals, the current status of the retail community, and developing technologies that will both advance and challenge the industry. This report is widely used by financial analysts, industry executives, journalists, and others who track the $24 billion home entertainment industry.

In releasing the report, VSDA President Bo Andersen stated, “VSDA’s Annual Report on the Home Entertainment Industry is both a detailed overview of 2004 and thoughtful look forward. It demonstrates the enduring strength and persistent popularity of home video for consumers. Once again in 2004, consumer spending on home video set an all-time record.”

Highlights from the 2005 Annual Report include:

Market Overview

— In aggregate, consumers spent more than twice as much money buying and renting DVDs and VHS cassettes in 2004 than in purchasing tickets at the theatrical box office.

— Consumer spending on home video in 2004 exceeded $24 billion.

— Sell-through accounted for over $16 billion, an increase of 15% over 2004.

— Rental generated $8 billion, remaining flat with 2003.

— In 2004, the major motion picture studios generated $21 billion worldwide from home video, 47% of all worldwide studio filmed entertainment revenue.

Hardware

— Nearly 60% of U.S. households had at least one console DVD player by the end of 2004. If portables are included, 73% of U.S. households had the capacity to view a DVD.

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— For the first time, DVD players began to replace rather than supplement the venerable VCR as VCR penetration actually declined in 2004.

Software

— By the end of 2004, more than 40,000 titles were available on DVD.

— Sales of single-disc “TV on DVD” releases increased 74% between 2002 and 2004.

— Spending on music DVDs increased 60% in 2004.

— Estimates of consumer spending on previously viewed VHS and DVD copies in 2004 ranged from $658 million to $2 billion.

Video Games

— Console video game software sales totaled $6.2 billion, a 7.5% increase over 2003.

— Video game rentals totaled $700 million.

— Fifty-three percent of video games rented were rated “E” (Everyone).

— The average game player is 30 years old.

— 47% of Americans plan to purchase one or more games in 2005.

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Video Retailers

— Mass merchants had a 50% market share of sell-through consumer spending on home video.

— The top three rental chains (Blockbuster, Hollywood, and Movie Gallery) collected more than 50% of consumer dollars spent on video rental transactions.

— Independently owned video stores held a healthy 38% market share of consumer dollars spent on rental transactions.

Piracy

— Video piracy cost U.S. retailers an estimated $1 billion per year.

— Studios lost an estimated $3.5 billion to piracy in 2004, not including losses from Internet-based piracy.

— For the first time, MPAA filed lawsuits against individuals engaged in illegal on-line file-sharing of movies.

— Camcording in movie theaters became a crime in 15 states.

Emerging Technology

— Select movies were released on Universal Media Discs playable on Sony PSP.

— The high-definition DVD format remained unresolved.

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— Video-on-demand was available in approximately 22 million U.S. households.

— Digital video recorders were in fewer than 7 million U.S. households.

In explaining the growth and continued strong performance of the home video industry, Andersen said, “Home video’s combination of economic value, diversity of product, and convenience remains unsurpassed in the minds of consumers. Retailers delivered these products at attractive prices while offering personalized service in customer-friendly surroundings. That unique combination is found only in video stores.”

Individuals interested in purchasing a copy of the 2005 Annual Report on the Home Entertainment industry can contact Elita Dandridge at 818-385-1500 x261 or research@vsda.org. Journalists can request a copy by contacting Andrew Mun at 818-385-1500 x 244 or amun@vsda.org.

Established in 1981, the Video Software Dealers Association (VSDA) is the not-for-profit international trade association for the $24 billion home entertainment industry. VSDA represents more than 1,000 companies throughout the United States, Canada, and other nations. Its members operate more than 11,500 retail outlets in the U.S. that sell and/or rent DVDs, VHS cassettes, and console video games. Membership comprises the full spectrum of video retailers (from single-store operators to large chains), video distributors, the home video divisions of major and independent motion picture studios, and other related businesses that constitute and support the home video entertainment industry.

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