Apple continues to dominate online movie market in U.S.; Vudu a dark horse in race

Despite losing nearly 10 percent of its market share, Apple (Nasdaq: AAPL) and its iTunes store continued to dominate the landscape in online movie rentals and purchases in 2010, holding on to 64.5 percent of the segment. Microsoft (Nasdaq: MSFT) (17.9 percent), Sony (NYSE: SNE) (7.2 percent) and Wal-mart's (NYSE: WMT) Vudu service rounded out the top four places on the list.

IHS Screen Digest reported that Apple saw its revenue for electronic sell through and VOD increase some 60 percent even as it lost share.

"The iTunes online store showed remarkable competitive resilience last year in the U.S. EST/iVOD movie business, staving off a growing field of tough challengers while keeping pace with an dramatic expansion for the overall market," said Arash Amel, research director, digital media, for IHS. "Apple faced serious competition from Microsoft's Zune Video and Sony Corp.'s PlayStation Store, as well as from Amazon (Nasdaq: AMZN) and--most significantly--Wal-Mart. However, iTunes managed to grow because of the introductions of the iPad and the second-generation Apple TV, which have spurred the company's movie rental offerings and have invigorated the iTunes multi-screen ecosystem. We expect that in the United States, Apple's strong performance in iVOD will allow it to continue to bypass the video on demand services offered by many major cable operators."

Wal-Mart's online movies service Vudu saw a spike in consumption after the company announced 99-cent promotional pricing on iVOD movies and support for a wider range of living room devices, including Sony's PlayStation 3 video game console.

"The future of the online movie business may come down to competitive battle between Apple and Wal-Mart," Amel said. "Although Wal-Mart is not on the charts yet, the company soon will become a major player if its current momentum continues. The company already represents a critical source of revenue for the major Hollywood studios because of its massive sales of Blu-ray and DVD movies-and now is expanding this business into the online realm."

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