On-Demand Video Displacing DVD Sales and Rental

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SCOTTSDALE, AZ — A trend that started with personal video recorders is again transforming the video industry, says a new study from research firm In-Stat. Consumers seeking greater flexibililty and convenience are abandoning video discs and turning to on-demand viewing of TV programs and movies. U.S. revenues from on-demand video are projected to reach $10 billion by 2014, while revenue from retail DVD sales and rentals will fall.

In-Stat identifies three separate on-demand revenue streams, all of which are projected to grow:

  • Transaction-Video-on-Demand includes online TV rentals, pay-TV VoD rentals and pay-per-view

  • Subscription VOD includes online video subscription services, premium TV channels and VoD that is a free adjunct to a pay-TV service

  • Electronic Sell-Through covers the purchase of TV and movie content independent of subsequent content delivery methods.

  • The success of on-demand electronic sell through will hinge primarily on the buy-versus-rent decision, In-Stat says. Realistically, electronic sell through cannot replace historic retail DVD video sales. However, the migration of DVD rentals to online transactional services will help fill this revenue gap. Subscription VOD will see the highest growth rate and also the most intense competition.

    “The transition to on-demand video does not mean that linear TV is coming to an end,” says Keith Nissen, principal analyst for the study. “What we are seeing is [that] the economics of the digital entertainment world have begun to shift. The future will be a hybrid ecosystem made up of both linear TV and on-demand video revenue streams. Pay-TV and broadcast TV services still generate the majority of the revenue, but both business models are currently under stress. On-demand viewing of video content, whether by transaction or subscription, is taking hold. In order to ensure the continuation of existing revenue streams, new value propositions must be created.”

    Some of the research findings include:
  • US TV download revenue will more than triple between 2010 and 2014.

  • Online à la carte rental of TV episodes will directly compete with online subscription TV services, such as Hulu Plus and Netflix, and may detrimentally impact the use of TV Everywhere services.

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