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Netflix's share of U.S. online movie revenue skyrocketed to 44 percent in 2011

When it comes to the U.S. online movie business, Netflix pushed Apple aside for top revenue in 2011.

IHS released its IHS Screen Digest Broadband Media Market Insight Report, showing that Netflix's subscription video on demand (SVOD) service surpassed Apple's iTunes, which is a transactional video on demand (VOD) service, in 2011.

According to IHS' report, Netflix's share of U.S. online movie revenue skyrocketed to 44 percent in 2011. This is a significant jump from Netflix's share in 2010, which was less than 1 percent.

Apple, on the other hand, had its total revenue drop to 32.3 percent in 2011. This was a pretty big decrease from 60.8 percent in 2010.

"We're in the midst of a significant change in the way people pay to consume movies online," said Dan Cryan, research director for digital media at IHS. "All the significant 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 customers want. In contrast, EST, which is much more profitable for studios on a per-transaction basis, is stuck in the doldrums."

Despite the fact that Netflix and Apple both represent different ends of the market and offer different products (SVOD services tend to have older titles while transaction VOD services have newer titles as well as older titles), they share a common interest in hardware. Netflix is available on various devices like game consoles, smartphones, tablets, etc. ITunes is also available on many devices, but mainly benefits Apple by being the proprietary media player program for Apple products.

The report also showed that all U.S. transactional VOD revenue grew 75 percent from $155 million in 2010 to $273 million in 2011. SVOD revenue far surpassed this number, hitting $454 million in 2011 from only $4.3 million in 2010. This put SVOD in the lead, and with Netflix being the king of SVOD services, Apple was knocked down a peg.

Source: IHS Media Relations

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By Solandri on 6/3/2012 3:36:36 PM , Rating: 2
I think what were going to have in the end is each movie studio is going to have their own pay streaming service. Only the smaller studios will stick together until their content catalog reaches a point of value where they can break away. Netflix is a middle man eventually the studios will have their own streaming service.

I'm not so sure. Technically the grocery store is a middleman. The lettuce farm, dairy farm, the pig slaughterhouse, the commercial fisherman could all sell to you directly. But there's value in putting all these things in a single store where customers can buy all they need on a single trip. Just because someone's a middleman does not automatically mean they're adding no value.

For example, Sony, Nintendo, and Microsoft do not do regional market analysis to decide how many units of their console to ship to each geographic region. Distributors and retailers like Best Buy do that, and just order x00,000 for New York, y00,000 for California, etc. from Microsoft et al. Yes the manufacturers could do that sort of market research, but it'd only be for few dozen products they produce. The distributors do it for thousands if not tens of thousands of products. They're much better at it than the manufacturers.

If the studios get together to create a consolidated streaming service where you can subscribe once and get access to content from all studios, then I could see that succeeding against Netflix. If it didn't run afoul of anti-trust regulations. But if each studio and TV station puts out their own independent subscription service, there's no way it'll fly. People aren't going to subscribe to two dozen services just to watch TV and movies. There will be value in a single consolidator - a middleman - to wrap the most popular services in a single package and use the power of their millions of customers to negotiate for lower prices. Basically what Netflix does.

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