Online Movie Spend Surpasses DVD, Blu-ray

For the first time, U.S. consumers could spend more on online movies this year than on physical video formats.

Per research firm IHS, this would mark the first year that consumption of legal, Internet-delivered movies will outstrip those of DVDs and Blu-ray discs, combined.

The legal, paid consumption of movies online in the United States is projected to reach 3.4 billion views in 2012 -- approximately 1.0 billion views higher than the 2.4 billion combined retail and rental physical video transactions, according to IHS.

It is important to note, however, that comparing digital views to physical retail and rental transactions is like comparing apples to oranges. Purchased and rented discs are often viewed more than one time per retail or rental 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.

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“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.”

Prospects for the physical video market could likewise improve this year compared to 2011, especially as U.S. consumer spending at the box office in March was up more than 20% from the same time last year.

Given hit movies such as “The Hunger Games,” “Twilight: Breaking Dawn Part 2” and “The Avengers,” a real potential exists for a lift in the video market this year that could minimize the overall projected decline, according to Arrington.

In 2011, average spending on physical video media per U.S. video household owning either a DVD or BD player slipped to $133.31 -- down 11% from $149.53 in 2010.

Consumer spending on packaged video will keep declining through 2016, reaching slightly more than $11.4 billion by the end of that year -- a neighborhood last seen in pre-DVD 1994. Of that total, retail spending in 2016 is estimated to amount to slightly less than $5.4 billion -- the level in 1997 when DVDs were first launched. Rental spending will be  more than $6 billion -- similar to what was reached in 1990, well before the 2001 rental peak.

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