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IHS
research director for digital media Dan Cryan said, “2011
marked a sea change in the online movies business that saw
the balance of consumer spending shift from a DVD-like transactional
model to more TV-like subscription approach. The online movie
business more than doubled in 2011 to reach $992 million and
it is expected to double this year as well.”
Online,
on the money: In the US, revenue from SVOD services—which
give consumers access to movies in return for a regular, recurring
fee—reached $454 million in 2011, growing by more than
10,000 per cent from $4.3 million in 2010.
As
a result, SVOD became the largest segment of the U.S. 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 $273 million in 2011, up 75
percent from $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 per cent to reach $236 million.
“We
are in the midst of a significant change in the way people
pay to consume movies online. All the significant growth in
revenue in the U.S. online movie business in 2011 was generated
by rental business models, which provide temporary access,
not permanent ownership. Rental delivers unlimited consumption
with a low monthly fee for older titles as well as cheap rentals
of new releases, providing the kind of value that online consumers
want. In contrast, EST, which is much more profitable for
studios on a per-transaction basis, is stuck in the doldrums.”
Cryan added.
Netflix
and Apple leading two sides of the market: What Netflix
and iTunes have in common is that both services are focused
on the hardware side of the business.
Netflix
is available on a range of connected devices, while iTunes
can take advantage of Apple’s soaring device sales growth.
Nevertheless,
comparisons between the two services have their limits. IHS
research reveals that it’s not unusual for 70 to 80 per
cent of titles consumed through a transactional service to
be new releases. However, SVOD services are overwhelmingly
used for older titles.
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