A spokesman for DEG: The Digital Entertainment Group says the trade organization didn’t deliberately choose a Friday afternoon to release its dreary new report about consumer spending on home entertainment in the first half of 2011. But from a PR perspective it probably doesn’t hurt to bury news that shows VOD and electronic distribution still can’t make up for the collapse in sales of DVDs. The headline number is that consumer spending on all forms of home video — including DVD and Blu-ray disc sales and rentals, VOD, and online — fell 5.1% vs the first half of 2010 to $8.3B. Last year, spending fell 3.3% in the first half of 2010. DEG says this year’s drop isn’t so bad because last year included Avatar. (It seems that the blockbuster was good enough to include last year when it made sales look strong, but is supposed to be treated as an anomaly now that it makes comparisons look weak.) Still, there’s no getting around the steep decline for DVDs. Consumers bought nearly $3.9B worth of DVD and Blu-ray content, down 18.3% vs the first half of 2010. At this time last year, disc sales were off 7.1% vs. 2009. DVDs are the culprit: Although DEG only reports figures for “packaged goods,” it notes that Blu-ray sales are up more than 10%.

Meanwhile, the rental business saw a few milestones in 2Q as sales at bricks-and-mortar rental stores like Blockbuster — which Dish Network recently bought out of bankruptcy — plummeted 29% to $393M: For the first time consumers spent more at subscription services such as Netflix ($808.1M, up 24.4%), kiosks including Redbox ($403.7M, up 36.7%) and VOD ($455.9M, up 0.3%).

DEG managed to find some reasons for cheer. The trade group’s release notes that total home entertainment spending only fell 3.6% in 2Q, an improvement from the 6.4% decline in 1Q. It also says that the industry “is extremely optimistic about the second half of the year,” when home video providers will offer Paramount’s Transformers: Dark Of The Moon, Warner Bros’ Harry Potter And The Deathly Hallows Part 2, and Disney’s Pirates Of The Caribbean: On Stranger Tides.