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IHS: Nordic Plummeting Disc Sales Culprit Is Netflix

11 Jul, 2014 By: Erik Gruenwedel

Cheap all-you-can-stream video undermining packaged media

Sales of DVD and Blu-ray Disc movies in Norway and Denmark have fallen more than 50% over the past few years — the fastest rate of decline anywhere in the world. The principal cause has been the rapid development of digital entertainment distribution spearheaded by Netflix, according to new data from IHS.

As Hollywood studios and media companies embrace Netflix and SVOD as incremental revenue channels, the flipside to $9 monthly all-you-can-stream video is market shrinkage.

Norway was once the fastest adopter of the Blu-ray format; now its video market is rapidly heading toward ‘digital crossover’ — the point when consumers spend more on digital video than on discs — and it’s happening faster than in any other mature Western market.

With Netflix expanding service into several European countries later this year, the current trend in the Nordics is likely to be repeated across many developed markets over the next few years, according to IHS.

“Historically one of the worlds’ most advanced video markets relative to its size, Norway was the first Western market to experience a very steep decline in DVD and Blu-ray Disc in 2013, with an unprecedented decline (38%) in consumer spending on packaged video in that year,” Tony Gunnarsson, video analyst at IHS Technology, said in a statement.

And the trend is not reversing. Sales data for the first six months of this year reveals that the rate of decline has accelerated, according to Norway film institute Film & Kino.

DVD unit sales have fallen by 45% while BD unit sales are down by 20% when compared with the first six months of 2013. Norway is now likely to best its previous record for decline in physical video consumption. Norwegian Blu-ray Disc purchases are projected to total Nkr 238 million ($40 million), down 17.5% from 2013, according to IHS.

In 2012, the average Norwegian TV household purchased seven DVDs and two BDs; in 2014 the average will be three DVDs and one BD.

The rate of decline in physical video in Norway — and across the Nordic region — accelerated considerably in 2013 when Netflix launched services there. In fact, IHS says the impact of SVOD on the physical video market in the Nordics has been a “hitherto unrecorded level of cannibalization” of physical video sales.

As a result of this apparent change in the consumption of video, Norway is likely to edge closer to the point where retailers find it difficult to justify space on store shelves for video product. This is alarming news for packaged-media retail in Europe as Netflix readies service launches in France, Germany, Belgium, Luxembourg and Austria in the fourth quarter.

“The current trend in the Nordics is likely to be repeated across many developed markets in the years to come, and as such the latest trends in Norway should be keenly observed by everyone with an interest in home entertainment,” Gunnarsson said.

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