IHS/iSuppli are forecasting in their Screen Digest Broadband Media Market Insight report that, numerically, online views of movies will overtake physical purchases for the first time this year in the US and will exceed 3.4 billion plays.
Within their release they use these definitions – “The physical segment consists of retail sales and rentals of VHS, DVD and Blu-ray discs (BD). The online portion is comprised of electronic sell-through (EST), Internet video on demand (iVOD) and subscription video on demand (SVOD).”
They are forecasting that online views will grow to around 5 billion by 2016 which we calculate to be a compound annual growth rate from this year of about 12.5%. The total movie views/transactions they envisage growing from the 2012 figure of 5.8 billion to, we think from inspection, about 7 billion in 2016.
Whilst not completing the “consumption” scenario, a quick look at box office attendances in the US/Canada as provided by the MPAA (Motion Picture Association of America) should help. From their Theatrical Market Statistics for 2011(pdf) the total admissions are given as 1.28 billion and whilst declining (about 3% a year if we go back as far as 2002) they possibly might be around the 1.25 billion level this year. (Maybe The Hunger Games will help!)
So the total US views/transactions/ admissions for 2012 in billions look like:
- Online views – 3.40 (48%)
- Physical transactions – 2.40 (34%)
- Box office admissions – 1.25 (18%)
- Total – 7.05
As IHS/iSuppli rightly point out on the volume side the “Key to the surge in consumption of online video has been the rise of all-you-can-eat subscription services such as Netflix and Amazon Prime, which offer customers unlimited on-demand movies for a flat monthly or annual fee. The result is that subscriptions in 2011 accounted for 94 percent of all paid online movie consumption in the United States, compared to just 1.3 percent of units consumed that were bought on an ownership basis via electronic sell-through.”
As far as market shares are concerned IHS/iSuppli comment “Netflix, while unquestionably the market leader, is not the only online SVOD game in town. Last year saw both Amazon and Hulu develop online streaming businesses at levels unheard of just a couple of years ago. For Amazon in particular, 2011 marked the transformation of Amazon Prime from a discounted shipping offer into a diverse entertainment proposition in its own right, allowing subscribers who paid the $79 per-year service access to a range of movies and TV shows.”
The revenue analysis is, as one would imagine, slightly different in total terms (using a similar extrapolation from the 2011 $10.6 billion actual figure for the US/Canada Box office takings) and look like, in billions:
- Physical transactions – $11.1 (49%)
- Box office – $10.0 (44%)
- Online - $1.7 (7%)
- Total – $22.8
IHS/iSuppli are forecasting that “The pattern will likely remain unchanged even by 2016 with online accounting for 17 percent of revenue, compared to 75 percent for physical video, and pay-TV video on demand taking the remaining 8 percent” These percentages only of course relate to physical and online which comprise 56% of our total.
The unit prices are:
- Ticket – $7.93 (2011)
- Physical $4.72
- Online $0.51
- Average $3.23
As far as the UK/Europe is concerned the current online market leader recently announced “…. that in February, for the first time ever, LOVEFiLM members streamed more films and TV series instantly over the Internet via LOVEFiLM Instant than rented DVDs, Blu-rays and Games.” NETFLIX have arrived and Sky through their new brand NOWTV are getting in on the act!
MPAA report that in 2011 we here in the UK spent $1.7 billion at the box office ranking 4th in the world outside North America. The world market they report, incidentally, as being $32.6 billion in 2011. which is more than 3x the North American market.
We think there’s a lot more disruption on the way and by 2016 there will likely be premium prices payable for online acquisition of new movies/programmes/content which will most definitely move the unit price of online up significantly. The future of physical and Box office markets must, as with the newspaper and recorded music industries, give them cause for concern.
Its the dozen W’s again - “Where we can watch – what we want, when we want it and where we want it.” The where is by and large – at home or on the move with a “destination” location coming way behind as the third choice.