Consumers Poised To Pay More For Web-Delivered Video Than For Discs: Report

Spending for DVDs and Blu-ray discs is falling so fast that 2012 likely will be first year when consumers will pay more to buy and rent movies via the Internet, according to a report today from IHS Screen Digest Video Intelligence Service. The research firm says that the average household will spend $123.50 to buy and rent discs this year — down from $133.21 last year and $149.53 in 2010. The average home spent $206.78 in 2006, when Blu-ray discs were introduced. Looked at another way, people spent $8.8B last year to buy packaged videos, down 12% vs 2010. That will keep falling to $5.4B in 2016 — which IHS notes is “the level in 1997 when DVDs were first launched.”

Meanwhile, consumers paid $5.7B to rent discs last year, down 7.3%. Much of that drop was due to the cut backs at Blockbuster, as well as the snafus at Netflix’ DVD rental business. With that largely behind us, and rental kiosks becoming more popular, disc rentals will increase slightly to $6B in 2016. IHS says that kiosks accounted for 34% of disc rental spending last year, and will grow to 41% this year, and hit 52% in 2015.

The silver lining for studios is that the online business is growing. “If revenue were to be added from other viewing options such as video-on-demand, Internet-based sales and rentals, and subscription streaming from providers like Netflix and Hulu Plus…consumer spending across all outlets of home video would amount to nearly $17.2B,” says IHS senior analyst for U.S. video Michael Arrington.

In a separate report, IHS said that spending for online movies more than doubled to $992M last year, mostly due to the growth of Netflix’s streaming service — which passed Apple to be the No. 1 online movie provider. Web spending is expected to double again this year but then slow, the company says, unless a company such as HBO offers a standalone streaming service or someone offers a Web-based replacement for pay TV.