While the physical music market has been through the wringer in the past year, the video category fared pretty well. The category is growing at 3% representing sales of almost £2.5bn - but this doesn't tell the full story.

The category, which is now all DVD based, is broken down into nine different sub-sectors - five are in growth and four have declined.

Film drama is the best-performing category with sales growth of 61.7%, and the action adventure movies sector was up 19.1%. Sci-fi was down 6% and comedy was a massive 19.4% down on last year.

However, much of this growth has been driven by the supermarkets, which have slashed prices in a bid to drive volume. To some extent, this policy has been effective as value has also risen, but suppliers are less happy because a natural conclusion of the price cutting is that margins have been squeezed.

This, says Buena Vista Home Entertainment's UK sales & marketing director Philippe Roucoule, has harmed the level of investment that companies can make in their ranges.

Roucoule says supermarkets need to develop a better understanding of the DVD category so that they can put real value back into the sector.

"The supermarkets have an assumption that all movies are the same and should have the same price. But, in reality, this is just not the case," he says.

"Movies should be viewed more like a bottle of wine - which are not all sold at the same price. The consumer is sharp enough to understand this, so the idea that all prices should be the same is a myth that needs to be dispelled."

Roucoule says that consumers who are looking to buy a DVD are interested in much more than just the price. He says that they will often come into a store looking for a specific movie and are unlikely to be persuaded by a different film just because it is cheaper.

He recognises that suppliers also have to do more to bring excitement back into the category and plans to do so with more in-store theatre and added-value products such as cult titles with more bonus features that will appeal to people who really love movies.

Buena Vista is currently working with Asda to create a special Disney area in-store.

"Disney is a strong brand that consumers trust," he says. "The Disney space will really help to flag up the fixture to shoppers."

Another area of the DVD sector that is showing strong growth is the television DVD. This sector is growing at 10.8% and represents 26.9% of the total DVD market. The category is being driven mainly by the continuing popularity of hit US series such as The Sopranos, Lost and 24.

While the category is now mostly DVD-based, Terry O'Kelly, technical communications manager at hardware specialists Memorex, says VHS is now on its last legs.

"VHS still has some life in it but the end is very near," he says. " Sales began to decline significantly two years ago and sales fell rapidly in 2006. The format still lives on in the form of VCR/DVD combinations but those devices are for transferring older tapes to discs - not to support the VHS format. Retailers who take VHS from their shelves will not miss it."

Gaming is becoming a more important category for retailers as with the newest consoles and leading games, the fixture offers higher margins than DVD and music formats.

O'Kelly says games are selling well but in an unexpected way. "Sony's Playstation 3 is not the hit some predicted - essentially it is just too expensive," he claims. "However, the console renewed interest in the older PS2 and PS units and their associated games. The console winner appears to have been the Nintendo Wii, which concentrates on providing simple fun for everyone rather than the latest ways to display computer graphics. Microsoft's Xbox 360 is holding its own in the middle of the Wii and PS3."

Console games are growing at 4% while sales of PC games have risen by 3% in the past year, according to TNS. Again, new formats such as the Wii have brought new buyers into the market - having already gained a 4.3% share of the market.

The Nintendo Wii has managed to encourage more family oriented gaming, with 15% of Wii games bought for family use.

However, according to TNS, it is the existing gamers that are buying new games more frequently, which is the main cause for the growth in sales across the various consoles.n