IHS iSuppli, the market research company, recently announced the Netflix has pushed past Apple to become the leading online movie provider in the United States.
Back in 2011, Netflix’s market share rose to 44%, from less than 1% only a year before. Apple, on the other hand, recorded a major loss, falling to 32.2% from 60.8% in 2010. Though Apple had been experiencing significant growth in revenue, Netflix managed to utilize the SVOD (subscription video on demand) growth to its advantage.
“2011 marked a sea of change in the online movies business that saw the balance of consumer spending shift from a DVD-like transactional model to more TV-like subscription approach,” said IHS’s Dan Cryan.
“The online movie business more than doubled in 2011 to reach $992 million and it is expected to double this year as well.”
SVOD services are indeed gaining momentum as customers prefer to pay a regular fee for unlimited movies, as opposed to paying per film as is done through iTunes. Revenue in the sector reached $454 million last year, up more than 10,000% from 2010’s revenue of $4.3 million.
The competition comes in the form of VOD and electronic sell-through, which require customers to pay a fee for each individual piece rented.
“We are in the midst of a significant change in the way people pay to consume movies online,” said Cryan. “All the significant growth in revenue in the U.S. online movie business in 2011 was generated by rental business models, which provide temporary access, not permanent ownership. Rental delivers unlimited consumption with a low monthly fee for older titles as well as cheap rentals of new releases, providing the kind of value that online consumers what. In contrast, EST, which is more profitable for studios on a per-transaction basis, is stuck in the doldrums.”
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