U.S. Households Continue to Shift Spending Toward Online Video

EL SEGUNDO: In 2011, U.S. households decreased their spending on physical media purchases and rentals at a double-digit rate, according to new data from IHS.

Average spending on physical media in U.S. video households that own either a DVD or Blu-ray Disk player fell to $133.31 in 2001, down 11 percent from the $149.53 reported in 2010. Of the 2011 total, 61 percent ($81 per video home) went to buying discs. The remaining $52 was spent on the cheaper option of rentals.

Total spending last year by Americans on packaged retail video was $8.8 billion, which is 12-percent less than the 2010 figure, $9.9 billion. Total spending also fell on rental video, though at a smaller 7.3 percent.

IHS predicts that consumer spending on packaged video will continue to decline through 2016, reaching just more than $11.4 billion by the end of that year. Retail spending of that total is expected to amount to less than $5.4 billion. Rental spending will be just above $6 billion. The IHS analysis suggests that Americans will pay to consume more movies online this year than they will on physical video formats. This would mark the first year that consumption of legal, Internet-delivered movies outstrips those of DVDs and Blu-ray Disks combined.

Legal, paid consumption of online movies in the U.S. is expected to reach 3.4 billion views this year, about 1 billion views higher than the 2.4 billion combined retail and rental physical video transactions. IHS notes that the comparison is hard to make, however, since purchased and rented discs are often viewed more than one time per transaction.

“The overall view for U.S. video spending is less bleak when other forms of transactional and on-demand subscription video are added to the mix,” said Michael Arrington, senior analyst for U.S. video at IHS. “If revenue were to be added from other viewing options such as video-on-demand, Internet-based sales and rentals, and subscription streaming from providers like Netflix and Hulu Plus—alternatives to physical disc purchases and rentals that consumers have been steadily gravitating toward for the past several years—consumer spending across all outlets of home video would amount to nearly $17.2 billion, a much more substantial figure.”