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DVD sales flat, but still dwarf downloads

Report from NPD Group shows consumers on average spend just 0.5 percent of money budgeted for movies and other video content on downloads.

UPDATE:To include quotes from NPD Group analyst Russ Crupnick

DVD sales are flat but the drop doesn't have anything to do with movie downloads, according to the NPD Group.

The research group reported Tuesday that, on average, consumers spent 41 percent of the money budgeted for movies and other video content by purchasing DVDs of films. Movie rentals on DVD were the next biggest category with 29 percent. Consumers spent 11 percent purchasing TV shows on DVD. About 18 percent went to theater tickets, according to the report.

Here's the kicker for Internet video: only 0.5 percent was spent on renting or purchasing TV shows or movies off the Web.

This shouldn't surprise anybody. Digital video is still in its infancy. Narrow bandwidth in the United States, compared with much of the industrialized world, makes it time-consuming to download the enormous movie files.

Technology that compresses those files have improved but the quality and viewing experience is still far inferior to watching a DVD. Hollywood still doesn't allow digital downloads the same kind of portability as DVDs. A consumer can buy a movie on iTunes that may not play on a non-Apple device.

Then there is the problem with choice. Most of the services still have only a fraction of the films available as any corner video store.

Stats like those from NPD Group, while they may be accurate, don't tell the whole story. Hollywood believes digital media is the future as evidenced by the deals made with Microsoft's Xbox, iTunes, Roku's Netflix Player, and others. Let's see how much market share downloads account for in the next couple of years.

"Main street continues to line up behind Blockbuster and Best Buy," said Russ Crupnick, NPD's industry analyst. "I think the studios are smart to try different things and learn what they can. Eventually, we're going to see downloads start to get traction. But from a consumer point of view, there's just not any stickiness now."