European DVD player installed base: Germany - 27%, UK - 19%, France - 19%

The German video market is the largest in Europe in terms of the installed base of DVD. Screen Digest estimates that by the end of 2004, 22.3 mln German homes (58% of all TV households) had at least one standalone DVD video player or recorder. Although penetration is slightly higher in both the UK and France, the smaller size of these countries mean they represent fewer than 16m DVD homes each. However, in terms of consumer spending on video, Germany comes a poor third, reflecting the fact that Germans spend relatively little on buying video software compared with their European neighbours.

Demand for video rental has always been low in Germany, reflecting the rental sector's historically poor reputation among German consumers. The country's strict classification system means that most of Germany's 4,500 rental stores are closed to anyone under 18 and much of the existing rental business (up to 40%, according to local estimates) is generated by pornographic material. Between 1999 and 2004 rental's share of German consumer spending has fallen from 40% to an estimated 17%.

In the late 1990s the average German VHS household rented around five titles a year, according to Screen Digest research. DVD rental rates reached a similar level in 2000 and 2001, rising to over six transactions in 2002. Since then, however, DVD rental rates have stabilised at less than five transactions per household per year. These figures are based on Screen Digest analysis of regular consumer panel research by GfK, which does not take into account online rental transactions, which we believe may be attracting a new group of German consumers to video rental. Any such growth, however, is likely to be counterbalanced by the popularity of illegal downloading in Germany, which industry sources blame for recent downturns in rental activity.