DVD sales are slipping, causing Hollywood to look for a new source of revenue

Representing over half the revenue that Hollywood studios generate from most feature films, DVD sales have become a huge factor on the bottom line of major content producers. But now DVD sales are slipping, growing just 2 percent this year from a double-digit rate two years earlier.

This plummet in sales, reports The New York Times, has Hollywood scrambling for a new source of revenue. It's easy to understand why. Studios earn $17.26 for each DVD they sell, but only $2.37 for movies on demand and $2.25 per DVD rented, according to Tom Adams, the president of Adams Media Research, an industry consultant based in Carmel, CA.

High-definition DVDs were supposed to pick up lack of sales, but technical delays and a contentious format war between Sony and Toshiba have dampened expectations for success of the new technology. Internet downloads, rentals, video-on-demand and other technologies generate far less income for the studios than sales of the DVD.

For the studios, the clock is ticking, the Times report said. Sales of standard DVDs are expected to fall by about 20 percent before 2010, according to Adams Media Research.

Most movies and many television shows now on DVD, so studios are running out of new material to sell. Some studios have been repackaging older hits into anniversary box sets and other promotions, but consumers may be tiring of that tactic.

Although sales are no longer growing at double-digit rates, consumers in the United States still buy about $16 billion worth of DVDs a year, the Times said. Part of the DVDs success is that the discs are easy to buy, easy to use and relatively inexpensive.