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iVOD Supplanting Electronic Sellthrough

14 Feb, 2011 By: Erik Gruenwedel

Movie rentals downloaded from the Internet will overtake digital movie sales by 2013, according to a new report.

IHS Screen Digest said Internet video-on-demand, or iVOD, movie revenue in the United States would increase to $341.7 million in 2013, up 120% from $155.2 million in 2010. Meanwhile, domestic electronic sellthrough, or EST, revenue will rise at a much lower rate, expanding by nearly 44% to reach $331.1 million in 2013, up from $230.6 million in 2010.

Web-based VOD movie growth will continue to outpace that of EST to reach $439.1 million in 2015, compared with $396.8 million for EST. These revenues do not include consumer spending on Netflix subscriptions, which provide a complementary subscription-streaming proposition for older movies not in the new release window.

Apple iTunes, the leader in the online movie market, has seen its new devices — the iPad and new Apple TV — significantly drive the iVOD business. The platform held its 55% share of U.S. movie iVOD in 2010 in the face of tough competition, although its movie EST market share eroded to 74%, due to Microsoft (Xbox Live) and Walmart (Vudu) entering into that business.

The changing trend is noteworthy considering EST’s market dominance over iVOD — until last year. When the economy buckled in late 2008, consumers began shifting their discretionary home entertainment spending from purchases to rental.

Arash Amel, research director of digital media for IHS, said increasing numbers of consumers are renting new release movies on street date and opting for subscription-based services such as Netflix for catalog fare.

“Unless there are major changes in the current model for movie EST, the U.S. market is destined to never reach the half-billion-dollar level,” Amel said. “In the absence of something happening, like selling the movies more quickly after theatrical release — ahead of Blu-ray and DVD — or making the EST experience as convenient for consumers as the type of ‘anytime, anywhere, any device service’ that Netflix currently provides, the U.S. EST market for movies will run out of steam.”

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