Monday, March 26, 2012

#MARKETS: "Online Video Spells Death for DVD"

A surge in viewership thanks to Netflix, Hulu, and Amazon video services will make 2012 the first year that more movies will be watched online than on DVD or Blu-ray disk.

Online movie viewing has been steadily growing, but a surge in 2012 will for the first time cause views to surpass DVD and Blu-ray disk combined. (Source: HIS)

For over 30 years, video tapes and disks made up the large majority of at-home views of movies. But in 2012 a surge on online viewing will for the first time surpass both DVD and Blu-ray disks. This trend in the U.S. is slated to presage a worldwide migration to watching movies online, in a manner similar to how more audio listens are now done from electronic media. However, like the CD which is still widely available for audiophiles, it will probably take over a decade for the DVD to become obsolete.

This marks the beginning of the end of the era when movies were viewed on physical media like DVD and Blu-ray. "This year will be the final nail to the coffin on the old idea that consumers won’t accept premium content distribution over the Internet," said Dan Cryan, senior principal analyst of broadband and digital media at information and analytics provider IHS.

If illegal online viewing is put into the equation, then online movie viewing has already passed DVDs, but 2012 will mark the first year that legal online viewing will surpass legal DVD and Blu-ray viewing.

In 2011 online views were just 1.4 billion compared to 2.6 billion for disks, but a 135 percent surge in online movie viewing will cause it to pass the 3.4 billion views in 2012, compared with just 2.4 billion views for DVDs and Blu-ray disks combined, according to a new report from IHS Screen Digest Broadband Media Market Insight.

IHS predicts a continued slow decline in DVD and Blu-ray movie viewing, while online movie viewing will continue to grow, albeit just 20 percent in 2013 before settling in to steady single digit growth out to 2016.

The reason for the surge of popularity in 2012, according to IHS, is the overwhelming popularity of flat-rate subscription services at Netflix, Hulu, and Amazon Prime. Plans can be had for as little as $79 per year.

Revenue wise, however, the DVD and Blu-ray will continue to bring in more overall profits than the online services, because the average cost of viewing an online movie is just 51 cents compared to $4.72 per view for DVDs and Blu-ray disks. This revenue discrepancy will continue for a while. Even in 2016, online viewing will only account for about 17 percent of the total revenue, compared to 75 percent for DVDs and Blu-ray (the remaining 8 percent going to cable- and satellite on-demand viewing) according to IHS.