Hollywood is living in some sort of fantasy land. George Lucas had this to say when questioned about why he moved up the release of the original Star Wars trilogy on DVD (bold mine):
Just because the market has shifted so dramatically. A lot of people are getting very worried about piracy. That has really eaten dramatically into the sales. It really just came down to, there may not be a market when I wanted to bring it out, which was like, three years from now. So rather than just sit by and watch the whole thing fall apart, better to bring it out early and get it over with.
In the words of a famous sports announcer, let's go the videotape. The Web site for the DVD Entertainment Group (their BOD is stocked with bigwigs from the large entertainment and electronics companies) states that "DVD [is] the fastest adopted consumer electronics product ever". There have been literally thousands of news articles written about the explosive growth of DVD sales; here are some quotes from an article on the CBS News Web site (from 10/2003):
Home video sales now account for nearly 60 percent of Hollywood's revenue. DVD sales are not only the fastest growing part of the movie business, they're changing the way Hollywood does business.
He says DVD sales can save a film like "Dark Blue," which pulled in a modest $9 million in theaters. "It actually did more revenues in DVD than it did at the box office," says McGurk, because the DVD market is a man's world.
Blockbuster films now often sell more than 10 million DVDs in the U.S. alone. And that's at $20 a pop. And with DVD players still in only half of American homes, Hollywood believes those soaring sales will just get hotter still.
Finding Nemo grossed $320 million from DVD sales in 2003. "Consumers spend more money on the DVD version of almost every movie than they do on that same movie in theaters, including blockbusters such as The Lord of the Rings, Finding Nemo and Pirates of the Caribbean" (USA Today). CNN/Money reports that the movie studios "pocket roughly 80 cents of every dollar on each DVD sold, a take well above the 50 cents for each dollar at the box office" and The Hollywood Reporter says that "studios are earning about 60% more upon initial release from video sales of theatrical feature films than they did during the VHS-only era". So, not only are video sales up overall, DVDs are more profitable for the media companies than VHS or the box office.
And the future looks rosy as well. PriceWaterhouseCoopers has a sample chapter of their Global Entertainment and Media Outlook 2004-2008 report** online which says:
We project filmed entertainment spending in the United States, EMEA (Europe, Middle East, and Africa), Asia/Pacific, Latin America, and Canada will rise at a 7.5 percent compound annual rate, reaching $108 billion in 2008 from $75.3 billion in 2003. EMEA will be the fastest-growing region, rising by 10.3 percent compounded annually to $36.9 billion in 2008 compared with $22.6 billion in 2003. The U.S. market will expand at a 6.3 percent rate, from $34.3 billion in 2003 to $46.6 billion in 2008. Spending in Asia/Pacific will increase from $13.3 billion to $17.3 billion in the five-year period, growing at a 5.4 percent compound annual rate. Filmed entertainment in Latin America will total $1.6 billion in 2008, up from $1.3 billion in 2003, representing a 4.6 percent gain compounded annually. Spending in Canada will rise from $3.9 billion in 2003 to $5.6 billion in 2008, 7.7 percent compounded annually.
This is anything but piracy "dramatically" eating into sales. Mr. Lucas, would you like to change your answer?
** The same report also says that "piracy will cut into spending, particularly on rental, with the most pronounced impact in Asia/Pacific and Latin America, although all regions will be affected", but there is no evidence given. In fact, in all the articles I read, piracy was handled in a very hand-waving fashion with no numbers or evidence to back up claims.