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IHS: Netflix Tops Apple in Online Movie Revenue

1 Jun, 2012 By: Erik Gruenwedel

Netflix’s market leader position in the subscription video-on-demand field helped it pass Apple’s transactional VOD business as the top revenue generator in online movies in 2011, according to a new report.

Revenue from SVOD services, which includes Amazon Prime, reached $454 million in 2011, up more than 10,000% from $4.3 million in revenue in 2010, according to IHS Screen Digest. As a result, SVOD became the largest segment of the U.S. online movie business in 2011, surpassing transactional VOD and electronic sellthrough.

Meanwhile, transactional VOD revenue — driven largely by Apple iTunes — increased 75% to $273 million in 2011 from $155 million in 2010. Electronic sellthrough grew 2.4% to reach $236 million.

“2011 marked a sea change in the online movies business that saw the balance of consumer spending shift from a DVD-like transactional model to more TV-like subscription approach,” said Dan Cryan, research director for digital media at IHS. “The online movie business more than doubled in 2011 to reach $992 million and it is expected to double this year as well.”

At the same time, IHS found that 70% to 80% of titles consumed through transactional VOD are predominantly new releases, while SVOD services are overwhelmingly used for older titles.

“Effectively the market has split,” Cryan said. “Netflix and Apple are competing for some of the same consumer time and money. However, the core value proposition of the two services is actually very different.”

While Netflix rules the SVOD market, its closest competitor — Hulu Plus — is less than 10% of its size. Apple’s iTunes continues to dominate the transactional segment, accounting for 63% of revenue, down slightly from 64.6% in 2010.

At the same time, the big growth story of 2011 was Walmart’s Vudu, which captured 8.2% of the transactional VOD market, up from 2.8% in 2010.

Most of this growth has been achieved by using a Netflix-like device strategy and has come at the expense of other providers, not Apple, according to IHS.

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