Studio Predicts Increased Sales and Falliing DVD Prices

A continuing boom in DVD sales will compensate for shrinking prices for the movie discs, Cinram International Inc. executives assured investors Wednesday, predicting holiday sales will be the strongest in the company's history.

"The price decline that has been a pattern since I started Cinram in 1969 is more than offset by a growth pattern that we see in DVDs," CEO Isidore Philosphe said in a conference call. "We are forecasting a growth of 25 per cent per year on DVDs - minimum - year after year until the year 2006. And the reductions on the prices are much, much less than that percentage."

The company earned $19.1 million, a record 33 cents per share, in the third quarter, compared with $14.8 million, 27 cents per share, in the year-ago period, although sales declined to $203.5 million from $224.7 million.

DVD sales provided 52 per cent of third-quarter revenue as Cinram's DVD shipments rose by 104 per cent to 80 million discs. Chief financial officer Lewis Ritchie noted that nearly half of American households now own DVD players.

"And the fourth-quarter holiday season is expected to be strongest to date, fuelled by a solid slate of releases that grossed $3.8 billion US at the box office," Ritchie said.

However, as the discs become more of an impulse buy, they have been going down in price.

The price Cinram gets for making DVDs for customers such as 20th Century-Fox has remained constant at about $1 US per disc, said analyst Greg Reid with Dlouhy Merchant, but retailers may be pressing manufacturers to help them bring prices down further.

He cited the recent DVD release of The Matrix Reloaded, which was supposed to sell for $29 but was offered at half that by big-box electronics outlets.

"People look at the retail prices and see them continue to plummet and they say at some point you'd expect that it would start to impact Cinram," Reid said.

"It's obviously one of the things that people continue to focus on and want to get comfortable with."

Aside from DVD volume growth, Cinram has other irons in the fire.

The October purchase of Time Warner's CD and DVD manufacturing business is expected to start bringing in about $150 million in revenue per quarter, Reid said.

The company also stressed that profits should increase as it produces fewer videocassettes and more DVDs, which are cheaper to make.

Because most of Cinram's sales now are in the United States, the company will start reporting in U.S. dollars next year, Ritchie said.

Analysts expect profit for the fourth quarter, Cinram's busiest, will double to 66 cents per cent. Full-year earnings are forecast at $1.33 a share, up from 98 cents in 2002.

Story source: yahoo.com.