Digital grows to 16% of consumer spending in the sector

While the Hollywood studios prep for digital to someday generate a larger portion of its homevideo revenues, they’re still earning most of their coin after the theatrical run from traditional discs.

Sales of DVDs and Blu-rays accounted for 61% of homevideo spending on movies last year, according to a new report by the NPD Group. While that figure is down from 64% in 2011, the volume still reflects why studios are eager to explore new distribution windows to protect disc sales and encourage more consumers to buy rather than rent.

Though consumers increasingly may be making a switch to subscription-based streaming services like Netflix or turning to kiosks operated by Redbox, as well as other digital VOD options, NPD attributed the decline in marketshare for discs primarily to the lower pricepoint for Blu-rays: In 2012, the average price of a Blu-ray fell 7% to around $19.97 per unit.

“There is a significant base of video customers in the U.S. who continue to be comfortable with physical formats, and a large majority haven’t made the complete transition from discs to digital video,” said NPD analyst Russ Crupnick. “For the time being, at least, consumers still like to own and rent movies and TV shows on DVD and Blu-ray, even in a world where connected devices and digital rental, streaming, and ownership options are becoming more accepted and commonplace.”

Still, studios are seeing the digital homevid market grow, by 2% in 2012, to account for 16% of overall consumer spending. Hollywood is heavily promoting UltraViolet to encourage more digital sales of titles. And as registered users climb to more than 10 million, electronic-sell-through still remains a small percentage of VOD revenue at around 16%, NPD said, still higher than Internet-based VOD services, which accounted for 12%.

Apple’s iTunes remains the top Internet-based VOD provider at 45%, followed by Amazon Instant Video (18%) and Walmart’s Vudu (15%) rounding out the top three.

When it comes to VOD rental revenue, 72% is generated from cable, satellite and telco pay TV operators, NPD said, a positive sign for studios promoting Movies on Demand that release films day-and-date with their disc releases at retail.

Redbox and other kiosk operators controlled 46% of all physical disc rentals in 2012, and saw sales increase 8% last year.

Companies like Netflix saw disc-by-mail rentals fall 5% to account for 32% of rentals as the companies focus more on growing their streaming businesses. Rentals from stores like Blockbuster now represent less than a quarter of all video rental volume, NPD said.

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