Falling DVD sales threaten to cut down profit for studio owners Time Warner, Walt Disney, Viacom and News Corp., and may force them to write down the value of movies, analysts told Bloomberg.

According to Digital Entertainment Group, fourth-quarter shipments fell 32% in the U.S. and Canada to 453.6 million DVDs – the biggest drop since the industry-funded researcher started keeping track in 1997. The decline is attributed to consumers shifting toward rental services such as Netflix Inc.,and the U.S. recession.

Home-video sales and rentals, mostly reflecting DVDs, accounted for 68 percent of the $88.9 billion global filmed- entertainment market in 2008, according to estimates by New York-based PricewaterhouseCoopers LLP. The figures include $3.89 billion in online rental fees and digital streaming revenue.

DVD sales may fall 11% this year and cause studios to write down new and recent titles that miss internal forecasts, Michael Nathanson, an analyst at Sanford C. Bernstein & Co. in New York, wrote in a report this month.

The analyst lowered earnings estimates for Viacom, owner of Paramount Pictures; Disney; and Twentieth Century Fox owner News Corp. for this year and next. He left his 2009 projection for Time Warner, owner of Warner Bros. Pictures, unchanged while lowering the 2010 forecast.

Time Warner’s shares dropped 5.8% after losing 39% last year. News Corp’s share fell 6%, and the share of Viacom, owner of MTV and Nickelodeon, fell 3.9%, after losing 57% last year.

The filmed entertainment division of News Corp, which includes Twentieth Century Fox Home Entertainment, reported a 73% drop in operating income for the last quarter of 2008.

Disney reported a quarterly net profit that fell 32% and CEO Bob Iger said "very significant" cost-cutting is in store for the company, which already has slashed hundreds of jobs. Its film studio, plagued by dwindling DVD sales, was the laggard. Iger noted that the average DVD household in the U.S. contains about 80 DVDs, so their He said Disney would reduce production, marketing and distribution costs of DVDs.

Story filed 09.02.09