U.S. Online Movie Consumption to Surpass Physical Videos

EL SEGUNDO: Americans are on track to pay for more online movies in 2012 than physical video formats, according to the IHS Screen Digest Broadband Media Market Insight report.

This will mark the first year in history that legal, Internet-delivered movies will outstrip those of DVDs and Blu-ray discs combined. The legal, paid consumption for movies in the U.S. is set to reach 3.4 billion views/transactions this year; this is 1-billion-units more than for physical video.

This year’s online video consumption via the open Internet means an annual growth of 135 percent from the year prior. The trend will see online transactions continuing to grow and physical video sales remaining flat or declining.

“The year 2012 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, broadband and digital media at IHS. “In fact, the growth in online consumption is part of a broader trend that has seen the total number of movies consumed from services that are traditionally considered ‘home entertainment’ grow by 40 percent between 2007 and 2011, even as the number of movies viewed on physical formats has declined.”

Although it’s declining, physical video this year will still bring in more viewing time from Americans, who will spend an estimated 4.3 billion hours on DVDs and Blu-ray discs, compared to 3.2 billion hours for movies online. While online will account for the majority of transactions this year, it is set to bring in a far lower share of revenue in 2012, at $1.7 billion, compared to $11.1 billion from physical formats. This is because consumers will pay an average of 51 cents for every movie consumed online, compared to $4.72 for physical video.

"After more than 30 years of buying and renting movies on tapes and discs, this year marks the tipping point as U.S. consumers now are making a historic switch to Internet-based consumption, setting the stage for a worldwide migration of consumption from physical to online," Cryan said. "We are looking at the beginning of the end of the age of movies on physical media like DVD and Blu-ray. But the transition is likely to take time: almost nine years after the launch of the iTunes Store, CDs are still a vital part of the music business."