Online video uptake killing DVD retail industry


Without doubt 2010 has been a great, maybe even watershed year for online video with online VOD revenues especially strong, yet this growth seems to have prompted a commensurate precipitous decline in the DVD retail market.

According to research by In-Stat, at the same time as a burgeoning subscription online VOD market will likely drive revenues approaching $3.5 billion by 2014, annual retail sales of physical discs are expected to experience double-digit decline, resulting in a drop of $4.6 billion from 2009 to 2014. Even worse for DVD, In-Stat predicts that the online digital paid video download and streaming segment, including purchase and rental, will grow from $2.3 billion to $6.3 billion during the same period.

The analyst’s new report, The Battle for OTT Video: Redistributing Video Industry Dollars, paints a picture of a very competitive online video market where rental of TV episodes will slug it out face to face with online subscription TV services, such as Hulu Plus and Netflix, and with fee paying online video sources such as Apple iTunes, Amazon, Vudu and CinemaNow.

Yet in addition to beating up the DVD industry, In-Stat warns that the highly competitive nature of the new online video markets may actually detrimentally impact the use of TV Everywhere services. Furthermore premium channels such as HBO and Showtime will be in competition with online video subscription services for both subscriber spending, as well as movie licensing rights.

“Video disc rentals will continue their significant decline,” says Keith Nissen, Principal Analyst. “Netflix is already shifting its focus to online streaming, and Red Box is evaluating a similar strategy. The convenience and utility of the online offerings are simply too compelling. Online rentals permit the selection of any movie or TV program from the Video-on-Demand library. Ultimately, it will be impossible for physical disc kiosks to compete with the in-home or in-store download-to-rent business model."