Video on demand still lags behind DVD and Blu-Ray

Feb 1, 2013

Global research firm the NPD Group reports that sales of Blu-ray discs and DVDs remain the largest source of revenue for the movie industry, accounting for 61 per cent of US home-video spending on movies in 2012. This is down slightly from the 64 per cent report in 2011, apparently caused by a fall in Blu-ray disc price. However, these numbers excluding contributions from subscription based movie-streaming services such as the market-leading Netflix.

The NPD is comparing physical disc sales with the download of individual movies, rather than the increasingly more popular option of monthly streaming packages.

According to NPD senior industry analyst, Russ Crupnick, Crupnick, there is a significant base of video customers in the US who continue to be comfortable with physical formats, and a large majority haven’t made the complete transition from discs to digital video:

“For the time being, at least, consumers still like to own and rent movies and TV shows on DVD and Blu-ray, even in a world of where connected devices and digital rental, streaming, and ownership options are becoming more accepted and commonplace.”

Crupnick says the digital video market for movies is growing, accounting for 16 per cent of US consumer expenditures (up two per cent on 2011). Pay-TV VOD movies from cable, satellite, and telco operators also rose 1 per cent to gain a 12 per cent share of revenues.

VOD rentals from pay-TV operators actually accounted for 72 per cent of all transactional VOD movie rental revenue in the past year. Electronic sell through (EST) of movies showed strong growth but remains a relatively small segment with just 16 per cent of VOD revenue. Internet VOD comprised the remaining 12 per cent, with iTunes the dominant provider. Apple’s iTunes also leads the internet VOD rental market with a 45 per cent share, followed by Amazon Instant Video with 18 per cent.

NPD’s “VideoWatch Digital” consumer tracker reports suggests that TV programming is also having an effect on the home-video footprint. 80 per cent of Netflix Watch Instantly rental transactions were TV shows, while in the EST arena, 90 per cent of the transactions were TV programmes, says Crupnick:

“In the market for television content, Netflix has amassed a strong slate of popular programs, including Breaking Bad and The West Wing, all of which capitalise on time-shifting behaviour because they immerse the viewer for shorter timeframes than full-length movies do. As long as TV content remains compelling and easily available, we can expect to see that sector of home video expand.”

Netflix CEO Reed Hastings suggested last year that the average American household watches 80 minutes of the services every day, which if true would make it more popular than any US cable service. Netflix’s $100m venture into quality original content creation can be seen as of today, with its new ‘House of Cards’ series available exclusively through its subscription streaming service. Netflix chief content officer Ted Sarandos said this week that: “The goal is to become HBO faster than HBO can become us.”

Unlike traditional TV series, Netflix is making the Kevin Spacey staring series available to watch in its entirety from day one rather than in weekly instalments. Time to cut the cord; it’s going to be a busy weekend…

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