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NPD: Movie Rental Biz Seeing ‘Red’

19 Jan, 2012 By: Erik Gruenwedel

Disc rentals fell 11% in 2011, as Netflix streaming and transactional VOD grab market share from declining video stores

Redbox saw its unit volume in disc rentals skyrocket 29% in 2011, as traditional brick-and-mortar video stores continue to cede market share, according to new data from The NPD Group. The kiosk vendor’s share of DVD and Blu-ray movie rentals rose from 25% in 2010 to 37% in 2011.

At the same time, Blockbuster saw its market penetration decline to 17%, while Netflix’s physical disc rental market share was flat year-over-year at 30%, despite falling to a two-year low of 25% in the fourth quarter as the service and subscribers transition to streaming.

“There’s no doubt that Redbox has been the largest beneficiary of the collapsing brick-and-mortar store rental business, especially with ongoing Blockbuster store closings and the fact that there are also fewer independent stores than the prior year,” said Russ Crupnick, SVP of industry analysis for The NPD Group. “The Netflix share erosion may have resulted from their recent well publicized challenges with pricing, and from their now-defunct Qwikster experiment; however, they are in the process of shifting customers to their Watch Instantly option, so not the entire physical movie rental share drop is a net loss.”

NPD said 31% of paid movie rentals now come from transactional and subscription video-on-demand (streaming). Netflix dominates digital rentals through its pioneering SVOD business with 55% market penetration in the fourth quarter, which was down from a peak of 59% in the second and third quarters.

Indeed, rentals of DVD and Blu-ray Disc movies dropped 11% — the latter underscoring the high-definition format’s rising appeal in sellthrough.

“The movie-rental market is clearly undergoing a sea change, as consumers become better equipped to access on-demand and streamed movies and are more comfortable with available delivery options,” Crupnick said. “Even so, renting physical discs from now-ubiquitous kiosks in grocery stores and other venues have taken the lead as the most popular movie-rental method in the U.S.”

The report helped drive Netflix shares up 5% to close Jan. 19 at $103.46 per share. Netflix’s stock has rebounded about 40% from a low of $64 per share last November. The company reports fourth quarter results Jan. 25.

Coinstar, which owns Redbox, saw shares increase slightly.  It reports Q4 results Feb. 6.


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