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iTunes Ups Online Movie Market Share After Two-year Decline

22 Aug, 2011 By: Erik Gruenwedel

Walmart’s Vudu and Amazon also increase market penetration in iVOD and electronic sellthrough, while Sony and Microsoft lose

Apple iTunes increased its market penetration in online transactional video-on-demand, or iVOD, and electronic sellthrough of movies during the first half of 2011 to 65.8%, compared with 64.9% during the same period last year, according to a new report.

El Segundo, Calif.-based research firm IHS (formerly Screen Digest) said iTunes’ increase marked a turnaround for the Apple platform, which had suffered market declines during the past two years, including an 11.9% decline in 2010.

Internet-based transactional VOD does not include cable or satellite TV transactions, or subscription VOD services such as Netflix and Amazon Prime.

Indeed, iVOD and EST business in the first half of 2011 amounted to $229 million, with EST accounting for $118 million and $111 million for iVOD. For the full year of 2011, IHS predicts the market will rise to $487 million, with EST representing $247 million, and iVOD taking up $240 million.

“iTunes’ expansion of its market lead represents a remarkable achievement in light of intensifying competition from a slew of aggressive rivals,” said Arash Amel, research director of digital media for IHS. “Much of [its] success can be traced to the rising usage of Apple’s AirPlay system, which allows wireless video streaming to consumer electronic devices, including televisions. This has expanded the reach of iTunes to new platforms, boosting sales of movies from the system.”

Meanwhile, Microsoft’s Zune Video Marketplace — the No. 2 online video store — declined in market share to 16.2%, down from 18.5% during the same period in 2010. The company had enjoyed a market share surge during the 2010 holiday season courtesy of the strong sales of the Kinect, a motion-sensing system for the Xbox 360. However, the impact of the surge since has dwindled, causing Zune’s share to decline, according to IHS.

For Sony, its PlayStation Store accounted for 4.4% of iVOD and EST movie share in the first half, down from 8.2% in 2010. This caused the PlayStation Store to drop to the fourth position, down from third place, which it had long occupied.

“The PlayStation Store fell out of the top three rankings chiefly because Vudu cannibalized its market share,” Amel said. “Furthermore, the global security breach that shut down Sony’s online gaming operations during a major portion of the first half had a deleterious impact on the PlayStation Store’s business.”

Amazon, which upped its market share percentage to 4.2% from 4% in 2010 in the first half, was not enough to withstand a surge from Vudu, which pushed the online retailer down to fifth place. Amazon also engaged in a shift in its business to SVOD with Amazon Prime.

Vudu’s share of EST and iVOD movie revenue rose to 5.3% in the first half of 2011, up from 1% during the same time in 2010. This allowed Vudu to rise to the No. 3 position earlier this year, up from fifth place.

“Just as [we] predicted in February, Vudu has emerged as a major market rival to established players like Apple and Sony,” Amel said. “Vudu’s gains were driven by several factors, including its shrewd device strategy, a good customer experience, a compelling user interface and its $1/$2 rental pricing system.”

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