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PwC: Digital Revenue Could Surpass Physical in 2015

2 Jun, 2015 By: Erik Gruenwedel

Projection includes subscription-streaming services such as Netflix and Hulu Plus

Consumers in the United States for the first time this year will purchase and rent more movies digitally than on disc, according to a new media report from PricewaterhouseCoopers (PwC).

Electronic sellthrough, transactional video-on-demand and subscription streaming revenue from filmed entertainment is projected to top $9.4 billion, compared with $7.7 billion in packaged media. In fact, digital home video ($12 billion) is expected to top the box office ($11.8 billion) as the lead revenue driver by 2017.

Through 2019, disc rental revenue will have a negative 14.1% compound annual growth rate (CAGR) to $730 million, while packaged media retail revenue will see a negative 8.4% CAGR to $4.5 billion. At the same time, Digital HD revenue via standalone services will see a 5% CAGR to $3.5 billion, and electronic sellthrough through multichannel video distributors such as cable, satellite and telecom will see 50% CAGR to $390 million.

By 2019, transactional VOD and OTT video such as Netflix, Hulu Plus and Amazon Prime will realize combined CAGR of 26.7% to $5.5 billion; with a separate 72.4% CAGR to $612 million via MVPD platforms.

Indeed, in first-quarter data released by DEG: The Digital Entertainment Group, the trade group saw consumer spending on Digital HD and transactional VOD reach $981 million, compared with $1.5 billion on packaged media. But when including $1.1 billion spent on SVOD, total digital revenue topped $2 billion. 

“In today’s multi-platform environment, [entertainment and media] companies must take a hard look at the talent, organizational structure and alignment of performance measures with overall strategy across their entire business,” Deborah Bothun, PwC’s U.S. entertainment, media & communications leader, said in a statement. “While this may seem self-evident, it remains a major challenge that many companies are struggling to overcome as they transform their operations to engage today’s consumer. Mastering the user experience will be the critical success factor for monetizing consumers and sustaining growth.”

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