Internet to surpass DVD in movie consumption, not revenue
Consumers will watch more movies online than on DVDs in 2012 for the first time, but will spend far less doing so, according to a new report.
The number of movies rented or bought online from outlets like Netflix and iTunes will grow 135% this year to 3.4 billion, according to IHS Screen Digest. But the research firm said people will spend only $1.72 billion on digital movies, compared to $11.1 billion on DVDs and Blu-ray discs.
In total, online stores and services will account for 57% of movie consumption in 2012, but only 12% of spending.
"The result would be a net decline in home entertainment revenue even as consumption reaches previously unattainable heights," IHS analyst Dan Cryan wrote in the report.
The reason: The array of low-cost options to consume movies online, particularly "all you can eat" subscription services like Netflix, which streamed more than 2 billion hours of video during the fourth quarter of 2011.
IHS said that Netflix and smaller competitors like Amazon.com and Hulu accounted for 94% of online movie consumption in 2011. Digital purchases accounted for only 1.3%.
Studios have responded to the trend by trying to keep more movies away from Netflix and other cheap rental services while also making it more attractive to buy films online. Most allow only older titles released at least a decade ago to be available for subscription streaming.
At the same time, Hollywood is aggressively pushing the new UltraViolet format, which enables consumers who purchase films to store a copy in a virtual "cloud" that they can access from a wide array of digital devices.
Giving the technology a significant boost, retail giant Wal-Mart recently agreed to back UltraViolet and to allow consumers to copy DVDs they already own to the cloud for as little as $2 each.