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Report: SVOD Tops Rental Market Share in 2013

2 Apr, 2013 By: Erik Gruenwedel

Streaming edges kiosks as rental market leader, according to new research

It’s a subscription video-on-demand world (spearheaded by Netflix) with the remaining rental channels increasingly secondary players, according to new research from The Convergence Consulting Group Limited.

The Toronto-based research firm estimates that SVOD services such as Hulu Plus, Redbox Instant by Verizon, Amazon Prime Instant Video and Netflix will represent 34% of the rental market in 2013, compared with 22% for kiosks; 19% for transactional VOD (cable, satellite, telco); 12% for by-mail; 9% for video stores; and 4% for iVOD.

This compared with an estimated 28% market share for SVOD in 2012; 21% for kiosks; 20% for transactional VOD; 15% for by-mail; 13% for video stores; and 3% for iVOD.

The rental home entertainment market continues to offer a lower-price value proposition than sellthrough, including negatively impacting DVD and Blu-ray, electronic sales and encroaching upon pay-TV.

Indeed, estimated download movie and TV sales represented 8.3% of total domestic disc and electronic sellthrough movie and TV sales.

The report said the audience for free, ad-supported full-episode TV has slightly declined. Based on the full-episode TV shows available on the networks and multichannel video program distributors, Convergence estimates that on average, 18% of the weekly viewing audience watched one to two episodes at a network, MVPD or one of their distribution partner’s websites — down from 19% in 2011. The report forecasts 17% for both 2013 and 2014.

“We attribute the decline to the growth of Netflix (Amazon Prime, etc.), increasing DVR penetration, the rise of online advertising minutes associated with free full episode TV online, and less free and more authenticated TV Everywhere platforms,” the report reads.

We estimate broadcast (including local station) and cable online TV advertising revenues represented 3.1% ($2.35billion) of 2012 domestic TV advertising revenue, and forecast 3.4% for 2013.

Convergence projects 31,000 domestic pay-TV subscribers were added in 2012, down from 112,000 in 2011, and forecast 98,000 TV sub additions for 2013. Annual U.S. TV subscriber additions from 2004 to 2009 averaged 1.86 million. The report estimates that 3.74 million (3.7%) domestic TV subscribers cut their TV subscriptions [in 2008 to 2012] to rely solely on Netflix, over the air, online, etc. — 1.08 million (1.1%) in 2012 alone.

“We forecast U.S. TV cord-cutter households will reach 4.7 million (4.7%) by year-end 2013,” the report reads.

At the same time, the study warned that without sufficient subscriber growth, a cut in programming spending, or higher prices, Netflix will continue to see margin compression.


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