How You Can Profit From the Decline of DVDs: 3 Stocks, and 1 Idea

If there's any life left in the DVD market, we'll know soon enough. Walt Disney (DIS) has just released Blu-ray and DVD editions of its early summer blockbuster, The Avengers.

Disney is betting big on the release in hopes that a $1.5 billion worldwide box office haul will translate into equally impressive home-theater demand. Premium packages include a four-disc combo that retails for $49.99 and includes Blu-ray and Blu-ray 3-D versions, the DVD version, a downloadable copy, and a full menu of downloadable digital movie music.

History says the strategy could work. Lions Gate Entertainment (LGF) enjoyed sales records when it released The Hunger Games on DVD and Blu-ray last month. Fans bought 3.8 million copies of the film during its first two days on sale in the U.S. and Canada. About 1.3 million of the discs sold were packaged in the more profitable Blu-ray format, The Los Angeles Times reports.

Consumers: No Longer Hungry for DVDs

As a big-budget action flick with wide appeal, The Avengers could enjoy similar success. But if so, it would also be a rarity. DVD sales have been slowing for years now.

The latest data from Digital Entertainment Group, which tracks the home theater market, shows that total U.S. spending on physical media fell 3.6% during the first half of 2012. And that's despite a 13% gain in Blu-ray sales; DVDs are an anchor weighing down the sector.

How to Profit From the Trend

Even so, enterprising investors may be able to cash in on the DVD's decline, thanks to recycling. A number of outfits have created trade-in programs for all sorts of entertainment and electronics. Hastings Entertainment has a concept store called TradeSmart that's located in suburban Colorado, not far from where I live.

Online, Spun.com offers a similar service whereby you package and ship used CDs, DVDs, and games. The best deals are like bartering: sell $30 worth of merchandise and use the credit to purchase "new" goodies, and the resulting package could end up costing you nothing. (Think of it as getting a reward for cleaning out overstuffed cabinets.)

Big retailers are also warming to this idea. Here are three with big interests in the recycling movement:

1. Amazon.com (AMZN): As a host for auctions and other sellers, Amazon has been taking a cut of sales on all sorts of recycled products for a while now. Recently, the e-tailer has become more deliberate in its efforts to cash in. Amazon's trade-in store covers books, video games, movies, TV shows, electronics, and music. Ship your trade-ins and collect an Amazon gift card for the value of your trades.

2. Best Buy (BBY): Much like Amazon's program but more comprehensive, Best Buy takes trades for cameras, GPS systems, home audio systems, and musical instruments, among other things. Shoppers can choose to trade in-store or online. Redemptions are paid via Best Buy gift cards.

3. eBay (EBAY): Finally, the old-fashioned option. Take a photo, write a listing, and put your items up for auction on eBay. Sure, Craigslist remains a viable option, but eBay still profits because of the simplicity and comprehensiveness of its model. Most transactions result in a listing fee (ka-ching!), a final value fee (ka-ching!), and a percentage of the amount paid via PayPal (ka-ching!).

How About a Fall Cleaning?
Many consumers won't go through the trouble, which means that even as fans line up to buy millions of copies of DVD and Blu-ray editions of The Avengers, millions more DVDs will be simply thrown away. Dumb. Recycling DVDs offers a way to be green and make some green at the same time.

Amazon knows it. So do Best Buy and eBay. Why not join them?

Motley Fool contributor Tim Beyers owned shares of Walt Disney at the time of publication. Check out Tim's portfolio holdings and past columns. The Motley Fool owns shares of Walt Disney, Best Buy, and Amazon.com. Motley Fool newsletter services have recommended buying shares of eBay, Walt Disney, and Amazon.com.