U.S. DVD sales and rentals of both standard DVDs and Blu-ray discs dropped yet again in 2008 from the previous year.

U.S. consumer spending on home entertainment fell 5.7 percent last year to $22.4 billion, driven by a 6.3 percent decline in DVD sales direct to consumers (also known as sell-through). Within sell-through, Blu-ray sales gained traction, while standard-definition DVD sales dropped 9.5 percent, according to trade group Digital Entertainment Group.

This is the second year that DVD sales have declined after beginning in 2007 when spending fell over 3% from the year before.

Although disc sales dropped 19 percent to $14.5 billion, rental revenue remained flat at $7.5 billion.

Hollywood studios and analysts blame it on DVD piracy.

We are more concerned about internet piracy than physical piracy, because controlling it is harder, says Ron Wheeler, head of anti-piracy efforts at Fox Entertainment Group.

Some in Hollywood believe that internet theft could even be the death of America's film industry.

Meanwhile, growth in Blu-ray sales momentum is unlikely to stem the decline in standard-def units, Sanford Bernstein analyst Michael Nathanson said in a report.

We fear that the current state of the DVD market will have negative near-term implications on media conglomerate earnings.

Investing in the media conglomerate stocks for the near-term is a challenge, Nathanson added, arguing that their earnings are economically sensitive and ad and consumer spending rebounds have often lagged economic recoveries.

Electronics