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Brits to Spend More on Digital Than Physical Video in 2016

6 May, 2016 By: Erik Gruenwedel

Home entertainment consumers in Great Britain this year for the first time will spend more on subscription streaming, digital sales and transactional VOD than packaged media, according to new data from Strategy Analytics.

The United Kingdom is the third-largest home entertainment market after the United States and Japan with £2.24 billion ($3.2 billion) in 2015 revenue, including £1.1 billion ($1.58 billion) spent on packaged media, according to Official Charts Co. data.

Strategy Analytics said British consumers would spend £1.31 billion ($1.89 billion) on streaming and EST and VOD in 2016 (23.7% more than 2015), compared with £956 million (($1.38 billion) on packaged media, a 16.3% decline, and below the £1 billion mark for the first time since 1994. Online formats will account for 58% of home video spending, compared with 42% for discs, which had a share of 52% in 2015.

Overall, Britons are projected to spend £2.27 billion ($3.28 billion) on home video this year, up 3% from 2015, and the equivalent of £6.63 ($9.58) monthly per household.

When comparing distribution channels, most Brits will still buy discs, but packaged-media sales will drop 16% to £905 million ($1.3 billion).

SVOD services such as Netflix and Amazon Prime Video remain the fastest-growing digital distributors, up 36% to £742 million ($1.07 billion) — or £1 ($1.45) in every £3 spent on home video. There are around 4.6 million Netflix households in Britain and 2.5 million with Amazon Prime. Around 20% of households who subscribe to a video streaming service subscribe to at least two, according to Strategy Analytics.

Transactional VOD rental will rise 8% to £338 million ($488 million) in 2016; EST will increase 16% to £234 million ($338 million). Disc rentals will fall 24% to £51 million ($73.6 million), or just 2% of the market.

“Five years ago, DVDs represented 86% of consumer spend on home video; in five years it will be less than 14%, with DVD/Blu-ray rental virtually extinct,” analyst Michael Goodman said in a statement.

Goodman said that as retailers scale back shelf space for packaged media, e-commerce will emerge as the lone platform to buy physical media.

“Although many people will always prefer a physical disc, retailers will have to decide whether it’s even viable to offer that format in five years’ time. Many won’t and with less high-street players around, it will be online, ironically, that keeps DVDs on life support.”

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