Americans will pay to consume more movies online in 2012 than they will on physical video formats, marking the first year that legal, internet-delivered movies will outstrip those of DVDs and Blu-ray discs combined, according to a report from IHS. The legal, paid consumption of movies online in the US will reach 3.4 billion views or transactions in 2012, approximately 1 billion units higher than the 2.4 billion for physical video for this year, according to the research. As recently as last year, physical video had claimed a commanding share of the market with 2.6 billion views or transactions, compared to 1.4 billion for online. This year’s online video consumption via the open internet represents annual growth of 135 percent from 2011. Online video transactions and videos are also set to continue increasing in the years to come, while physical video sales are expected to decline or stagnate in comparison.
The physical segment consists of retail sales and rentals of VHS, DVD and Blu-ray discs (BD). The online portion is comprised of electronic sell-through (EST), internet video on demand (iVOD) and subscription video on demand (SVOD). Key to the surge in consumption of online video has been the rise of all-you-can-eat subscription services such as Netflix and Amazon Prime, which offer customers unlimited on-demand movies for a flat monthly or annual fee. The result is that subscriptions in 2011 accounted for 94 percent of all paid online movie consumption in the US, compared to just 1.3 percent of units consumed that were bought on an ownership basis via electronic sell-through. Although it is declining, physical video this year will still command more viewing time from Americans, who will spend an estimated 4.3 billion hours on DVDs and Blu-ray discs, compared to 3.2 billion hours for movies online.
Although online will account for the majority of transactions this year, it is set to attract a far lower share of revenue in 2012, at USD 1.7 billion, measured against USD 11.1 billion derived from physical formats. This is because consumers will pay an average of USD 0.51 for every movie consumed online, compared to USD 4.72 for physical video. The pattern will likely remain unchanged even by 2016, with online accounting for 17 percent of revenue, compared to 75 percent for physical video, and pay-TV video on demand taking the remaining 8 percent.The phenomenal growth of subscription movie consumption raises the prospect that as SVOD services become more widely adopted, they become an appreciable drain on the time that consumers would have used to watch movies in more lucrative ways, IHS believes. When this is combined with the possibility that consumers will always find something to watch, the still-nascent EST business could have its wings clipped before it can really take flight, even as consumption reaches previously unattainable highs.
