The company which owns local distributor Madman Entertainment has warned that it will lose up to $39 million in fiscal 2011.
Funtastic – which also owns toys, sporting and confectionery brands – said weaker consumer demand had prompted it to write down the value of several assets on its balance sheet and restructure the business to lower costs.
However, its business had also been affected by: a key retailer dropping Funtastic’s brands, a significant fall in sales of its Razor Ripstik skateboard, and weaker sales in Madman's home entertainment category.
The company is expected to release its full annual accounts shortly.
Madman joint chief executive Paul Wiegard said that the entire home entertainment market (DVD and Blu-ray disc sales) had declined by about 14 per cent over the year-to-date, according to GfK data.
"That's a significant number but it's certainly not a free-fall," he said.
Sales of DVD and Blu-ray discs across the $1.29 billion local market declined by 5 per cent in 2010 despite strong Blu-ray sales growth, according to the Australian Home Entertainment Distributors Association (AHEDA).
While consumers are beginning to shift to digital downloads, that sector only accounted for $35 million in sales last year, up from $16.8 million in 2009.
Earlier this month, the ABC also told a senate enquiry that commercial revenue generated by its TV programs – largely through DVD sales – has slumped while the cost of acquiring content has increased.