Report: Netflix Surpasses Apple to Take Lead in U.S. Online Movie Business in 2011

written by: Richard Kastelein

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Research firm IHS Screen Digest's latest report puts Netflix’s share of online movie distribution dollars at 44 percent compared to just 32.3 percent for Apple - which means that Netflix beats Apple as No. 1 online movie supplier in the USA.

Riding a tidal wave of growth for subscription video on demand (SVOD), Netflix Inc. in 2011 surged past Apple Inc. to become the largest U.S. online movie service in revenue terms, according to a new IHS Screen Digest Broadband Media Market Insight Report from information and analytics provider IHS (NYSE: IHS).

Netflix’s share of U.S. online movie revenue soared to 44 percent in 2011, up from less than 1 percent in 2010, as presented in the table below. The caused the company to rise to first place in 2011. Meanwhile, Apple’s share of total revenue declined to 32.3 percent last year, down from a 60.8 percent in 2010, despite enjoying strong revenue growth.

“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,” said Dan Cryan, research director for digital media at IHS. “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 United States, 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 percent 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 percent to reach $236 million.

“We are in the midst of a significant change in the way people pay to consume movies online,” Cryan said. “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.”

 

 

 

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