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NPD: Digital Growing, But Discs Remain Revenue King

Posted by: , 15:59 AEDT, Sun February 3, 2013

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Blu-ray and DVDs still the most important source of revenue for the home video industry, despite growth in digital distribution
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The latest report from research company NPD shows that while revenue from digital video download and streaming is growing, discs by far remains the most important income source for the home video industry.

Blu-ray and DVD sales accounted for 61% of home video spending in 2012, compared to just 16% for digital distribution, although none of these figures include subscription VOD services such as Netflix Instant.

While disc revenue's overall share of the revenue pie was down slightly from the 64% recorded a year ago, much of this was down the the decreasing average price of Blu-ray movies, which fell 7% to $19.97 per unit. Digital distribution's revenue share was up 2% from 2011.

"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," explained NPD media analyst Russ Crupnick.

While virtual monopolies are being maintained in the electronic sell-through market (dominated by iTunes), and the subscription VOD market (dominated by Netflix), competition in the growing Internet (and transactional) based VOD market appears to be heating up. While iTunes was still in a strong position, it only accounted for 45% of these types of transactions, Amazon, VUDU, Xbox 360 Video, all had a piece of the pie, ranging from 14% to 18%.

For disc rentals, Redbox continues to dominate the entire marketplace with 46% of physical disc rentals, up 8% from a year ago. The growth comes at the expense of by-mail disc rentals (dominated by Netflix), with market share dropping by 5 percentage points to 32%. Brick and mortar rental is hanging in there with 22%, down 2%.

NPD also had a look at what people were watching on subscription VOD and electronic sell-through (EST) services, and found that most were watching TV shows. 80% of all Netflix Instant transactions and 90% of EST transactions were for TV shows. NPD analyst Russ Crupnick believes this is due to the way TV episodes are better able to capitalize on the "time-shifting behavior" of viewers, due to the episodes' "shorter timeframes" compared to traditional movies.


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