Gains in its subscription based online video-on-demand service has raised Netflix to the number one position for revenue among online movie services for 2011. Netflix took a deep cut into Apple’s share of the market.
According to statistics released by research firm IHS, the company known for its red DVD-carrying envelopes grew its share of market revenue from less than one percent in 2010 to over 40 percent in 2011, enough to overtake former leader Apple and its iTunes service. It was reported in March 2011 that Apple only accounted for 4 percent of the U.S. digital video market, but lead in terms of video sales.
Subscription based video-on-demand (SVOD) revenue jumped to $454 million in 2011, that was an amazing 10,000 percent change from 2010’s $4.3 million. This makes SVOD the most valuable sector of the U.S. online movie market, vastly outpacing the 75 percent revenue growth seen by transaction based services like iTunes.
IHS showed Apple’s piece of the pie shrink from 60.8 percent in 2010 to 32.3 percent in 2011, a huge drop from the overwhelming 71.5 percent share iTunes enjoyed in 2009. While Apple saw slight declines in 2009 and 2010, the company was well ahead of its closest competitor Microsoft, which held 16.7 percent of the market two years ago, when Netflix barely entered into the equation.
Netflix’s dazzling performance is based on two things, the company’s decision to directly charge for SVOD service, and the overall trend away from physical media services that allow customers an allotted number of DVD and Blu-Ray discs for a monthly charge. Interest in SVOD has increased as internet connected set-top boxes and TVs have made it easier for customers to access content.
“2011 marked a sea change in the online movies business that saw the balance of consumer spending shift from a DVD-like transactional model to more TV-like subscription approach,” said Dan Cryan, research director for digital media at IHS. “The online movie business more than doubled in 2011 to reach $992 million and it is expected to double this year as well.”