The category may well be called home entertainment but for many suppliers and distributors of music, games and DVDs the category has been far from fun. The sheer volume of competition means value is being attacked at every turn in this fast-moving channel, as high-street specialists battle with supermarkets, internet delivery services and the boom in legal and illegal downloading.
Though the latest TNS data shows the total video market was up 3% in value terms for the year to 4 March and the games market was up 3.7%, the total physical music market was down a massive 14.3%.
Music has been hit by the growth in downloading, with internet sites such as iTunes offering consumers instant access to the music they want 24 hours a day. The rise of downloading has also sounded the death knell for the CD single.
In May Asda announced that it had ditched the CD single, following a similar move by Tesco the month before.
Tesco recently revealed that it will be significantly scaling down the store space it dedicates to DVDs as well.
Tesco says the space will now be given to "more modern" initiatives such as Apple Zones - Mac and iPod areas - that it introduced at Milton Keynes earlier this year. Of course, Tesco also has its own online DVD rental service, offering free delivery.
However, it blamed falling sales for downscaling its DVD offer, which has angered suppliers who blame the supermarkets for driving value out of the sector in the first place.
"Irresponsible pricing from the multiples affects the breadth of range we can offer," says Philippe Roucoule, sales director UK and Ireland, Buena Vista Home Entertainment. "This is driving down margin and revenue, making it hard to grow the category."
Asda has also come under fire for driving value out of the category. Roucoule is particularly upset by Asda's decision to sell the latest James Bond release, Casino Royale, for £7. "Obviously this sort of deal grabs the headlines and Asda will say it drives footfall, with shoppers buying other goods," he says. "But in the long-term I do not think it does any good to condition consumers to expect these unrealistic prices."
He also disagrees with the way retailers try and make a new release work for them by offering deep promotions for the first week or two weeks of release, before restoring the normal price.
"Traditionally the majority of sales for a movie come in the first 12 weeks after it comes out," he explains. "But I am not convinced retailers are growing volume by having a huge promotion in the first few weeks. All that's happening is that it shifts people's purchase patterns further forward to those first couple of weeks."
However, Asda's music and video director Fergal Gara refuses to let supermarkets take the blame for devaluing the sector. "Price has played a substantial role in growing the sector," he claims.
More competition has hit high street specialists the hardest. Earlier this year, following poor sales, HMV was forced to launch a "radical" review of its business. Also in January, the Music Zone chain of stores folded and eventually sold its stores to rival Fopp.
There's better news for the games sector, with the 3.7% sales lift translating to a market value of more than £1.3bn.
Interest in gaming appears to have been turned up a notch with the pre-Christmas arrival of the Nintento Wii taking on Sony's Playstation 3 and the Xbox 360 from Microsoft. Following vast amounts of advertising for the new interactive console, the company says sales are ahead of its forecasts.
Almost everyone prospered from the demand for plasma, high-definition and wide-screen televisions in the run-up to last years's World Cup. At one stage Dixons claimed to be selling a wide-screen TV every 15 seconds.
That's unlikely to be the case now that the supermarkets have declared war on high street operators, including Dixons and Comet. Earlier this year, Asda made a great show about its DVD player for just £9 for a limited period. The Grocer's Non-Food report, meanwhile, shows it is now offering a DVD player for £17.74 compared with £17.84 at Tesco.
However, the supermarkets are no longer simply dealing in cheap alternatives to well-recognised brands. Much of the supermarkets' increased strength in this market has been through a branded assault on the high street operators, whereby a battle for footfall has resulted in aggressive price reductions on well-known brands.
Research from the online bank Egg recently found that the cost of electricals has fallen by more than 50% in the past 10 years and this has much to do with the supermarkets taking a greater interest in the sector.
Indeed, much of Asda's recent press advertising has directly compared prices of its electrical and home entertainment offerings to the leading high street retailers.
Meanwhile Tesco recently offered a Sony 32in HD LCD TV at £649.97, £20 cheaper than Comet's website and £40 less than in-store. It also claimed to offer a saving of £34 on a Sony mini hi-fi system which it was selling for £99.97 and was available through the Comet website for £126.
It would seem that the challenge from the supermarkets to the likes of Argos, Dixons and Comet is likely to become even stiffer in the coming year as Tesco's catalogue business Tesco Direct becomes more established and Asda continues to grow its non-food operations.
Sainsbury's too has recently strengthened its electrical offering and Morrisons is likely to take these categories more seriously after completing a root and branch review of its business. Neither of these two multiple retailers plan to cut back on the space they dedicate to DVDs either. Unlike Tesco they have both announced they will be
extending the space they dedicate to this sector.n