You will be redirected back to your article in seconds

Netflix tops iTunes in online film revs

SVOD skyrocketing as homevideo spend drags

Netflix’s pricing woes last year did little to dent its massive impact on U.S. online video spending in 2011, according to new data from research firm IHS.

The streaming service not only surpassed Apple for the first time in terms of market share for total revenues derived from spending on movies, it nearly cut iTunes’ portion in half. Apple’s cut of total revenues plummeted from 61% in 2010 to 32%. Netflix’s 44% share represented an increase of nearly 10,000% over 2010, when its share was less than 1%.

Netflix’s stratospheric rise last year validated its subscription VOD business model at a time when a la carte transactions and rentals of physical discs continued what seems to be a secular decline. The 11% drop in average spending on discs — both film and TV — year over year was the first double-digit decline in a category that has been sinking steadily since 2004.

Netflix’s surge could have been greater had the company not hiked some of its prices and split off its DVD component, decisions that sent its subscriber base tumbling late last year. Yet revenue was strong enough that Netflix nearly single-handedly gave SVOD nearly half of the online movie business, which doubled year over year to almost $1 billion.

SVOD alone accounted for $454 million, 66% more than the transactional VOD and 92% more than electronic sell-through managed to muster. Transactional VOD is still up a healthy 75% while EST eked out a 2% bump, which reflects the diminishing prospects of ownership of titles in a digital marketplace that facilitates rentals.

ITunes offers transactional VOD and EST, but not SVOD, though Apple has long been rumored to be preparing a foray into SVOD. For now, the company has been content to give owners of its many devices easy access to Netflix apps, which may be suppressing iTunes revenues.

That said, Netflix and iTunes offer a different mix of titles. IHS estimates that as many as 80% of movies watched on transactional platforms like iTunes are new releases, while Netflix traffics heavily in library titles.

The softness of EST may be hurting iTunes more than anything when you consider that just one newly released movie can go for as much as $20, more than double what it costs to watch as many titles as you want on Netflix for one month.

What may be even more surprising is that iTunes barely inched down its market share when you take out Netflix and make a more direct comparison to just other transactional VOD players. Apple still dominates with 63% of revenue in this category, down from just 65% the previous year.

A distant third to Netflix and Apple in share of online movie revenues was Microsoft, with 7.6%. Walmart’s Vudu followed with 4.2% and then Sony, 2.4%. However, Vudu was the only one of the three up over last year, while Microsoft plummeted from 2010 share of nearly 17%. Microsoft allows for sale and rental of movies through the XBox Live component of its gaming console.

Netflix’s success didn’t help the physical-disc biz, which declined in both sales and rental revenues to a combined $14.5 billion, down from $16 billion in 2010. But the physical disc market may actually look better next year, predicts IHS analyst Michael Arrington, given the strength of the box office year to date.

Retailers via kiosk like Redbox may slow the decline in physical-disc rentals somewhat. They accounted for 34% of that category in 2011, a figure expected to break 50% by 2015.

Arrington also estimates that the total home entertainment market is about $17.2 billion when spending on physical discs is combined with multichannel VOD, digital VOD, SVOD and EST.

Popular on Variety

More Digital

  • Gabrielle Carteris

    SAG-AFTRA Urges Gavin Newsom to Sign Law Punishing 'Deep Fake' Videos

    SAG-AFTRA National Executive Director David White is urging Gov. Gavin Newsom to sign legislation that institutes penalties for nonconsensual digital sexually explicit videos, also known as “deep fakes.” The legislation, Assembly Bill 602, targets companies and individuals who create and distribute the videos in California without the consent of the individual being depicted. “We urge Gov. [...]

  • Facebook Portal logo

    Facebook Is Launching a Portal TV Device: Here’s What We Know

    Facebook is getting ready to launch a TV streaming device in time for the holiday season, Variety has been able to confirm with multiple sources familiar with the company’s plans. The new streaming hardware will be part of the company’s Portal family of devices, featuring a camera, and combining video chatting with TV viewing and [...]

  • MoviePass card

    MoviePass Shuts Down, With Parent Company Citing Failure to Raise Funds

    MoviePass, the long-struggling theater subscription service, finally appears to be down for the count. On Friday, MoviePass notified remaining subscribers that it would be shutting down the service effective Sept. 14, 2019, because “its efforts to recapitalize MoviePass have not been successful to date,” parent company Helios and Matheson Analytics announced. “The company is continuing [...]

  • Disney Plus - Full Lineup

    How to Browse the Disney Plus Catalog the Company Is Testing in the Netherlands

    Disney began testing its Disney Plus streaming service in the Netherlands this week. Consumers in the U.S. will have to wait until November 12 to get access to the service, but European streaming aggregator JustWatch already makes it possible to browse the catalog available during this beta test. JustWatch is one of a number of [...]

  • JoJo Siwa'The Angry Birds Movie 2'

    Nickelodeon Star JoJo Siwa Gets Her Own Dance-Tour Mobile Game (EXCLUSIVE)

    Fans of JoJo Siwa will be able to join the teen influencer’s dance squad on stage — virtually — in a new mobile game. In “JoJo Siwa — Live to Dance,” players will become part of the Nickelodon and YouTube star’s worldwide tour on her professional dance team and experience what it’s like to be [...]

More From Our Brands

Access exclusive content