Report: Consumers Favor Streaming Over Transactional VOD31 Aug, 2011 By: Erik Gruenwedel
Consumers of movie rentals are increasingly opting for subscription-based video-on-demand platforms such as Netflix and Amazon Prime instead of transactional VOD, according to a new report.
Dallas-based Parks Associates said that during a recent six-month period, U.S. online video subscribers spent nearly $50 each on average for video subscriptions, while a la carte video typically garnered less than half that amount. From 2009 to 2010, the number of purchased movie and TV-show downloads dropped by 56%, and movie-rental downloads fell by 70%.
Consumers continue to migrate away from file-sharing and a la carte transactional download services to the adoption of streaming subscription services. As of the fourth quarter in 2010, domestic broadband households reported streaming an average of 2.4 movies and TV shows from a subscription provider — a 60% increase from the 1.5 average reported in 2009.
Subscription VOD services are driving consumer online video spending, according to Parks. Based on the reported usage of video download services by U.S. survey respondents in Q4, consumer spending on a la carte video during a six-month period ranged from $12 to $26. Comparable spending on video services subscriptions during that same period reached at least $48 per household.
Driving this transition, of course, is Netflix, which ended its most recent fiscal quarter with more than 25 million subscribers in North America.
“The all-you-can-eat-style subscription approach taken by Netflix has proven successful in the U.S. market,” Parks said in its report, “Online Video and Internet Services: Global Outlook.” “It has helped to drive up consumption – and spending - for online video.”
The report cautioned that the SVOD model is not without its potential pitfalls, which include proper monetization, content licensing, distribution costs and charging users accordingly.
Indeed, Netflix’s Sept. 1 price increase for joint disc or streaming rentals underscores the fiscal pressures the online disc rental pioneer is facing acquiring higher quality content while expanding streaming service abroad.
It is exactly this type of deep-pocket requirement that many believe will put Amazon at an advantage should it ever decide to aggressively ramp up its Amazon Prime loyalty membership program that currently offers about 9,000 titles.