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Digital Movie Sales and Rentals - US - August 2012

This report explores the market for digital movie sales and rentals, including all television and film programming sold via an intangible file. Commentary throughout provides actionable insights to digital marketers and brand managers via the review of innovation in the market and the attitudes and habits of consumers in relation to digitally transmitted content, as well as DVDs and Blu-ray.

Discussion is based around sales data, the competitive context created by the collapsing physical disc market and its possible rejuvenation, the drivers behind movie purchasing, the wider implications of cultural shifts in media usage, and the practices of leading purveyors of digital content. Topics explored also include attitudes to high-definition (HD) content, willingness to pay a premium for it, and the role of demographics in sales with separate discussion regarding single parents, Hispanics, and blacks. Mintel’s proprietary research is also presented by age and household income, including where digital movies are purchased, how consumers select their store of choice, and how they decide when to buy physical discs and when to buy digitally distributed content.

For the purpose of this report, digital movies consist of sales of subscription streaming services, VOD purchases from pay TV providers, and rentals and sales from digital movie stores, including Amazon Instant Video, iTunes, VUDU, Best Buy CinemaNow, and other online stores that sell or rent films via internet service. Sales and discussion include TV programming sold through these distribution channels.

The focus of this report is on the purchasing habits of adults age 18+, but commentary on market potential among teens and kids is also discussed.

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data sources
          • Sales data
            • Consumer data
              • Abbreviations and terms
                • Abbreviations
                  • Terms
                  • Executive Summary

                      • The market
                        • Tenfold increase in sales expected from 2007-17
                          • Figure 1: Fan chart forecast of U.S. digital movie sales and rentals, 2007-17
                        • Digital sell-through far behind digital rentals
                          • Figure 2: U.S. digital movie sales and rentals, by segment, 2011 and 2012
                        • Netflix, Hulu Plus drive sales
                          • Physical market erodes under price pressure
                            • Figure 3: U.S. fan chart forecast of U.S. physical disc sales and rentals, at current prices, 2007-17
                          • 3-D final refuge for physical discs
                            • iTunes dominates electronics sell-through, digital store rentals
                              • Figure 4: Average number of digital movies bought in past 30 days, by digital movie store, April 2012
                            • Market factors
                              • Brands vie over price, library, and convenience
                                • Hey Netflix subscriber, would you like to try our service?
                                  • Ample room for growth within current broadband households
                                    • Roadblock in mobile internet
                                      • Content still king
                                        • The consumer
                                          • Discs still dominate rentals
                                            • Millennials centerpiece of rental and purchasing
                                              • Figure 5: Average number of movies bought in past 30 days, physical vs. digital, by age, April 2012
                                              • Figure 6: Average number of movie rentals in past 30 days, by type of rental, by age, April 2012
                                            • Middle-income choose subscriptions, high-income head for 3-D rentals
                                              • Figure 7: Average number of disc rentals in past 30 days, by price and type of disc, by household income, April 2012
                                              • Figure 8: Average number of digital or physical movie rentals in past 30 days, by type of rental, all vs. high-income households, April 2012
                                            • HD too pricy for most
                                              • Figure 9: Perceptions of HD, April 2012
                                            • Advantage goes to the incumbent
                                              • Figure 10: Digital store selection factors, by household income, April 2012
                                            • The digital buyer is the physical buyer
                                              • Digital buyers more keen on HD
                                                • Price, impulse central motivations for digital vs. physical decision
                                                  • Single parents lead couples, those without children in purchasing
                                                    • Figure 11: Average number of DVD or Blu-ray discs purchased or rented in past 12 months, by marital status and presence of children, August 2011-March 2012
                                                  • Blacks lead in home-video consumption
                                                    • What we think
                                                    • Issues in the Market

                                                        • Isn’t there enough programming on cable and the internet?
                                                          • What’s the justification for $150 in annual household spending?
                                                            • What creates the demand for individual pieces of content?
                                                              • What’s wrong with relying on studio marketing clout?
                                                                • Which digital retailers are creating original content?
                                                                • Trend Applications

                                                                    • Inspire Trend: Brand Extension
                                                                      • Inspire Trend: Attention Economy
                                                                        • Inspire 2015 Trends
                                                                          • Brand Intervention
                                                                          • Insights and Opportunities

                                                                            • One for you, one for me
                                                                              • Figure 12: Purchase of DVDs as gifts in last three months, by age, August 2011-March 2012
                                                                              • Figure 13: Purchase of DVDs as gifts in last three months, by household income, August 2011-March 2012
                                                                            • Digital only gifts
                                                                              • The role of teens and kids in the gift market
                                                                                • Figure 14: Purchase of DVDs as gifts in last three months among teens, by gender and age, October 2010-November 2011
                                                                              • Movies in the cloud for kids
                                                                                • Figure 15: DVD purchase in past year, by or for kids, October 2007-November 2011
                                                                              • Three-day rentals
                                                                                • Figure 16: Length of time needed to finish watching a film, by methods of buying and renting movies in past 30 days, April 2012
                                                                              • Independent film
                                                                                • Figure 17: Preference for independent film by method of acquiring digital movies, April 2012
                                                                              • Providing bandwidth on cellular networks
                                                                                • Figure 18: Device on which last digital-store movie was watched, April 2012
                                                                              • Connecting with over-45s as they connect smart TVs
                                                                                • Figure 19: Device on which last digital movie was watched, by age, April 2012
                                                                              • DVD extras
                                                                                • Coordinated industry marketing
                                                                                • Market Size and Forecast

                                                                                  • Key points
                                                                                    • Sales to double through 2016
                                                                                        • Figure 20: U.S. Model of digital movie sales and rentals, at current prices, 2007-17
                                                                                        • Figure 21: U.S. Model of digital movie sales and rentals, at inflation-adjusted prices, 2007-17
                                                                                      • Fan chart forecast
                                                                                          • Figure 22: Fan chart forecast of U.S. digital movie sales and rentals, 2007-17
                                                                                      • Market Drivers

                                                                                        • Key points
                                                                                          • Penetration for home broadband rising slowly
                                                                                            • Internet access highest among under-45s, over-$50Ks
                                                                                              • Figure 23: Internet access, home vs. any, by age, April 2011-November 2011
                                                                                              • Figure 24: Internet access, home vs. any, by household income, April 2011-November 2011
                                                                                            • Mobile internet: Throttling sales via restrictive plans
                                                                                              • Figure 25: Access to 3G or 4G mobile internet via cell or tablet, by age, December 2011
                                                                                            • PC penetration at a standstill
                                                                                              • Figure 26: Personal PC ownership, 2009 and 2011
                                                                                            • Access to VOD rising, but penetration still lower than broadband
                                                                                              • Box office sales
                                                                                              • Competitive Context: Physical Discs

                                                                                                  • Key points
                                                                                                    • Physical disc sales eroding
                                                                                                      • Figure 27: U.S. physical disc sales and rentals, at current prices, 2007-17
                                                                                                    • Fan chart forecast
                                                                                                        • Figure 28: U.S. Fan chart forecast of U.S. physical disc sales and rentals, at current prices, 2007-17
                                                                                                    • Market Segmentation

                                                                                                      • Key points
                                                                                                        • Subscription streaming carries half of sales
                                                                                                          • Figure 29: U.S. digital movie sales and rentals by segment, 2011-12
                                                                                                      • Innovations and Innovators

                                                                                                        • Amazon, Ultraviolet, present physical/digital bundles
                                                                                                          • Walmart, Samsung convert disc-to-digital
                                                                                                            • Roku, VUDU, Xbox make STBs vanish
                                                                                                              • Watchit, Viewdini hunt down content
                                                                                                                • Membership has its benefits
                                                                                                                  • Blockbuster sVOD an exclusive membership
                                                                                                                    • Amazon cross-markets with free shipping
                                                                                                                      • Fandor gives back to the film community
                                                                                                                      • Marketing Strategies

                                                                                                                        • Key points
                                                                                                                          • Netflix
                                                                                                                            • Figure 30: Netflix, “Have Imagination” television ad, 2011
                                                                                                                          • Hulu Plus
                                                                                                                            • Figure 31: Hulu Plus, “Alien Forces” television ad, 2012
                                                                                                                            • Figure 32: Hulu Plus, “What will you TiVo?” internet ad, 2012
                                                                                                                          • iTunes
                                                                                                                            • Figure 33: Apple Computer/iTunes, “Cartoon Classics” television ad, 2011
                                                                                                                          • Amazon Instant Video
                                                                                                                            • Walmart/VUDU
                                                                                                                              • Figure 34: Walmart “Disc-to-Digital” television ad, 2012
                                                                                                                            • Best Buy/CinemaNow
                                                                                                                              • DISH/Blockbuster
                                                                                                                                • Figure 35: DISH Network, “Blockbuster Movie Pass” internet ad, 2012
                                                                                                                                • Figure 36: Blockbuster, “We used to be a Netflix family” television ad, 2011
                                                                                                                              • Verizon/Redbox
                                                                                                                                • Figure 37: Verizon, “Watch episodes of suns of guns” television ad, 2011
                                                                                                                            • Purchasing and Renting

                                                                                                                              • Key points
                                                                                                                                • DVDs still most common purchase and rental
                                                                                                                                  • Figure 38: Methods used to rent movies or TV shows in past 30 days, April 2012
                                                                                                                                  • Figure 39: Methods used to buy movies or TV shows in past 30 days, April 2012
                                                                                                                                • Millennials centerpiece of sales and rentals
                                                                                                                                  • Figure 40: Number of movie or TV show purchases in past 30 days, by method used, by age, April 2012
                                                                                                                                • Streaming beats disc rentals among 18-24s
                                                                                                                                  • Figure 41: Methods of renting movies or TV shows in past 30 days, by age, April 2012
                                                                                                                                  • Figure 42: Methods of renting movies or TV shows in past 30 days, by household income, April 2012
                                                                                                                                • Streaming services account for greatest volume of rentals
                                                                                                                                  • Figure 43: Number of movie or TV show rentals in past 30 days, by method used, by age, April 2012
                                                                                                                                • Blu-ray sales driven by high-income households
                                                                                                                                  • Figure 44: Number of movie or TV show purchases in past 30 days, by method used, by household income, April 2012
                                                                                                                                • Middle-income choose subscriptions, high-incomes head for 3-D rentals
                                                                                                                                  • Figure 45: Number of movie or TV show rentals in past 30 days, by method used, by household income, April 2012
                                                                                                                              • The Digital Movie Store

                                                                                                                                • Key points
                                                                                                                                  • iTunes dominant
                                                                                                                                    • Figure 46: Where digital movies were bought in past 30 days, April 2012
                                                                                                                                    • Figure 47: Number of digital movies purchased, by store, in last 30 days, April 2012
                                                                                                                                    • Figure 48: Number of digital movies rented, by store, in past 30 days, April 2012
                                                                                                                                  • Store selection: price, resolution, and history
                                                                                                                                    • Figure 49: Store selection process for purchase and rental of digital movies, by age, April 2012
                                                                                                                                    • Figure 50: Store selection process for purchase and rental of digital movies, by household income, April 2012
                                                                                                                                • The Digital Movie Viewer

                                                                                                                                  • Key points
                                                                                                                                    • Synergy in movie buying
                                                                                                                                      • Figure 51: Cross-tabulation of means of buying movies or TV shows in past 30 days, April 2012
                                                                                                                                      • Figure 52: Means of buying movies and TV shows in past 30 days by means used to rent movies, April 2012
                                                                                                                                      • Figure 53: Cross-tabulation of means of renting movies or TV shows in past 30 days, April 2012
                                                                                                                                      • Figure 54: Physical disc purchasing in past 30 days by means of buying movies and TV shows, April 2012
                                                                                                                                    • Attitudes to HD
                                                                                                                                      • Figure 55: Attitudes to HD among digital movie viewers, by means of renting movies or TV shows, April 2012
                                                                                                                                    • Factors in the decision to buy physical vs. digital
                                                                                                                                      • Figure 56: Decision process for buying discs vs. digital, April 2012
                                                                                                                                  • Attitudes to Content and HD

                                                                                                                                    • Key points
                                                                                                                                      • Younger consumers looking for more than television offers
                                                                                                                                        • Figure 57: Attitudes to television, independent film, and repeat viewings of film, by age, April 2012
                                                                                                                                      • Attitudes about the value of HD
                                                                                                                                        • Figure 58: Perceptions about value of HD, by age, April 2012
                                                                                                                                        • Figure 59: Size of most recently acquired television by household income, August 2011-March 2012
                                                                                                                                        • Figure 60: Perceptions about value of HD, by household income, April 2012
                                                                                                                                    • Custom Consumer: The Single Parent

                                                                                                                                        • Key points
                                                                                                                                          • Single parents show elevated use of home video
                                                                                                                                            • Figure 61: Number of movies owned on DVD, by marital status and presence of children, August 2011-March 2012
                                                                                                                                            • Figure 62: Time spent watching DVDs in the past week, by marital status and presence of children, August 2011-March 2012
                                                                                                                                            • Figure 63: Downloading of movies from internet in past 30 days, by marital status and presence of children, August 2011-March 2012
                                                                                                                                            • Figure 64: Number of discs purchased or rented in past 12 months, by marital status and presence of children, August 2011-March 2012
                                                                                                                                        • DVD Usage Among Blacks and Hispanics

                                                                                                                                          • Key points
                                                                                                                                            • Blacks lead in disc consumption
                                                                                                                                              • Figure 65: Number of movies owned on DVD, by race/Hispanic origin, August 2011-March 2012
                                                                                                                                              • Figure 66: Time spent watching DVDs in past week, by race/Hispanic origin, August 2011-March 2012
                                                                                                                                              • Figure 67: Where discs are bought or rented, by race/Hispanic origin, August 2011-March 2012
                                                                                                                                          • Appendix: Additional Useful Tables

                                                                                                                                            • Time needed to watch a movie
                                                                                                                                              • Figure 68: Time needed to watch a movie, by household income, April 2012
                                                                                                                                              • Figure 69: Time needed to watch a movie, by age, April 2012
                                                                                                                                            • Attitudes to content
                                                                                                                                              • Figure 70: Attitudes to television, independent film, and repeat viewings of film, by household income, April 2012
                                                                                                                                            • Buying and renting
                                                                                                                                              • Figure 71: Purchase of DVDs as gifts in last three months, by marital status and presence of children, August 2011-March 2012
                                                                                                                                              • Figure 72: Penetration for purchasing or renting discs by teens, October 2010-November 2011
                                                                                                                                              • Figure 73: DVD rental in past year by kids, October 2010-November 2011
                                                                                                                                              • Figure 74: Purchase of discs in past 30 days by age, April 2012
                                                                                                                                              • Figure 75: Purchase of discs in past 30 days, by household income, April 2012
                                                                                                                                              • Figure 76: Number of movies bought by physical-disc purchasers, April 2012
                                                                                                                                            • Library size
                                                                                                                                              • Figure 77: Number of movies and television shows owned on DVD, by age, August 2011-March 2012
                                                                                                                                            • Time spent watching DVDs
                                                                                                                                              • Figure 78: Time spent watching DVDs in past week, by age, August 2011-March 2012
                                                                                                                                              • Figure 79: Time spent watching DVDs in past week, by gender, August 2011-March 2012
                                                                                                                                            • Where discs are bought and rented
                                                                                                                                              • Figure 80: Where discs were bought or rented, by household income, August 2011-March 2012
                                                                                                                                              • Figure 81: Where discs were bought or rented, by age, August 2011-March 2012
                                                                                                                                              • Figure 82: Where discs were bought or rented, by teens, October 2010-November 2011
                                                                                                                                          • Appendix—Trade Associations

                                                                                                                                            Companies Covered

                                                                                                                                            • Amazon North America
                                                                                                                                            • Apple, Inc
                                                                                                                                            • Best Buy stores (USA)
                                                                                                                                            • Blockbuster Inc
                                                                                                                                            • CinemaNow, Inc
                                                                                                                                            • DEG: The Digital Entertainment Group
                                                                                                                                            • Dish Network
                                                                                                                                            • Facebook, Inc.
                                                                                                                                            • Motion Picture Association of America
                                                                                                                                            • National Cable Television Association (NCTA)
                                                                                                                                            • Netflix, Inc.
                                                                                                                                            • Nintendo of America Inc.
                                                                                                                                            • Redbox Automated Retail, LLC
                                                                                                                                            • Satellite Broadcasting Communications Association
                                                                                                                                            • Sprint Nextel Corporation
                                                                                                                                            • TiVo Inc
                                                                                                                                            • Twitter, Inc.
                                                                                                                                            • U.S. Bureau of Labor Statistics
                                                                                                                                            • Verizon Wireless (Cellco)
                                                                                                                                            • Walmart Stores (USA)

                                                                                                                                            Digital Movie Sales and Rentals - US - August 2012

                                                                                                                                            £3,174.67 (Excl.Tax)