Netflix in 2011 surged past Apple to become the largest US online movie service in revenue terms, according to a study by IHS iSuppli. Netflix’s share of US online movie revenue soared to 44 percent in 2011, up from less than 1 percent in 2010. Meanwhile, Apple’s share of total revenue declined to 32.3 percent last year, down from 60.8 percent in 2010. In the US, revenue from SVOD services, which give consumers access to movies in return for a regular, recurring fee, reached USD 454 million in 2011, growing by more than 10,000 percent from USD 4.3 million in 2010. As a result, SVOD became the largest segment of the US online movie business in 2011, surpassing the other major parts of the market, transactional VoD and electronic sell-through. This change can be attributed to two factors: Netflix’s decision to start charging directly for online access, and the major growth in the number of people using online SVOD.
Meanwhile, transactional VoD expanded to USD 273 million in 2011, up 75 percent from USD 155 million during 2010. In contrast to SVOD, transactional VoD services like iTunes require consumers to pay a separate fee to rent each individual movie. EST grew by just 2.4 percent to reach USD 236 million. Apple’s iTunes continues to dominate the transactional segment, accounting for 63 percent of revenue in this area, which was only down slightly from 64.6 percent in 2010. Walmart’s Vudu captured 8.2 percent of the growing transactional market, up from 2.8 percent last year. Most of this growth has been achieved by using a Netflix-like device strategy and has come at the expense of other providers, not Apple.
The growth in SVOD revenue seen in 2011 is not likely to continue at the same rate in the future, iSuppli expects. Netflix's customer transition is now complete. And while its effect will be felt this year, which will be the first full year of paid streaming, Netflix's US digital customer base is likely to expand at a slower rate, in keeping with premium pay-TV channels. Consequently, the research expects transactional VoD to experience stronger growth than SVOD after this year, unless there is a significant market entry, such as a standalone HBO streaming subscription or a full-fledged pay-TV subscription service delivered over the open internet.
