U.S. consumers trend toward renting, rather than owning online movies

Those book cases full of carefully labeled DVD's have been, in the past two years, slowly giving way to queues full of digital movie copies as American's have steadily moved away from owning physical media to digital copies stored on their hard drives. Now, according to IHS Screen Digest research, even those digital copies are beginning to disappear as consumers turn instead to renting videos on the Internet, with the trend accelerating so strongly that the company predicts that by 2013, Internet video on demand movie (iVOD) movie revenue will exceed that of electronic sell-through (EST), a first in the industry.

The company says it expects iVOD revenue to reach $341.7 million in 2013, up from $155.2 million in 2010, an increase of more than 120 percent. And, it says, EST will increase as well, but at a more pedestrian 43.6 percent rate, to reach $331.1 million in 2013, up from $230.6 million in 2010. By 2015,it says, the iVOD market will reach $439.1 million, compared to $396.8 million for EST.

(Netflix spending wasn't included because the movies are older and not in the new release window.)

"Starting in 2010, U.S. online consumers began to embrace iVOD and shift their spending from buying movies to renting them," said Arash Amel, research director, digital media, for IHS. "The switchover from EST to iVOD also has been driven by online movie providers' efforts to promote the rental model. Together with the continued popularity of subscription-streaming service Netflix, we are witnessing a new 'access' model appear for online movies in which library titles are consumed as part of an all-you-can-eat subscription, while new releases are rented."

And, he said, the EST market is destined to continue to stutter because it's inconvenient and is limited.

"Unless there are major changes in the current model for movie EST, the U.S. market is destined to never reach the half-billion-dollar level," Amel said. "In the absence of something happening, like selling the movies more quickly after theatrical release--even ahead of Blu-ray and DVD--or making the EST experience as convenient for consumers as the type of 'anytime, anywhere, any device service' that Netflix currently provides, the U.S. EST market for movies will run out of steam."

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