The Digital Entertainment Group, a trade group whose members include studios, consumer electronic companies and others, will report that U.S. consumers spent $4.5 billion on home entertainment in the first quarter this year, an increase of 2.5 percent from a year ago.

That's the second quarter of growth in the last three quarters for home entertainment spending, which includes purchases and rentals of DVDs, Blu-ray discs and online, as well as subscriptions to services like Netflix.

Overall spending declined on those items by 2.1 percent in 2011, to $18 billion, the seventh consecutive year of decline, according to data on the group's website.

"The business feels as if it has begun to stabilize," said Ron Sanders, president of Warner Home Video and DEG president. "Hopefully, we've hit bottom."

Sales of Blu-ray discs surged by 23 percent, the group said. That growth was spurred by strong Christmas sales of Blu-ray players, continued video sales of holiday releases like the hit "Kung Fu Panda 2" and the February release of the blockbuster "The Twilight Saga: Breaking Dawn - Part 1."

Blu-ray growth partially offset the continued decline in DVD sales. Packaged good sales, which include both formats, fell by 0.6 percent from a year earlier, to $2.1 billion.

Home sales of film and tv shows reversed that decline, and increased by 0.5 percent if sales through electronic outlets such as Apple's iTunes service are included. Consumers purchased $165 million of those so-called electronic sell-through products.

The industry's largest growth engine continues to be online subscriptions, such as those offered by Netflix, which grew five-fold in the quarter, to $548.6 million.

Most of that online subscription growth appears to come from Netflix customers who chose subscriptions for streaming over its traditional DVD by mail service when the company split the two options last year. Nationwide, DVD subscription sales fell by $322.8 million in the quarter.

Industry officials expressed optimism that growth will continue, based on continued sales of Blu-ray players and introduction of the studio-backed UltraViolet service by which consumers can buy movies that are shared among several cloud-connected devices. Nearly 2 million users have signed up since the serviced was introduced late last year, DEG said.

"We believe we're at an inflection point," said David Bishop, president of Worldwide Sony Pictures Home Entertainment. "We've created an installed base that will grow, and which we think will continue to give us momentum."

(Reporting By Ronald Grover; Editing by Sandra Maler)

(An earlier version of this story was transmitted in error.)

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