Buy a Movie Online Lately? You're Not Alone.

By Steve Anderson January 09, 2014

A new study out from Digital Entertainment Group suggests that the idea of making customers wait to rent movies or stream movies may have actually spurred more than a few buying decisions. Customers have been flocking to digital movie purchases in huge numbers recently, even enough to help stem the tide of losses in physical product, at least somewhat. That's got companies reconsidering the digital frontier, and potentially even putting more into it.

The Digital Entertainment Group study showed that digital movie purchases were up substantially, up 47 percent in 2013 to reach a combined total of $1.19 billion. That put enough fire under the entire market as a whole to deliver a total increase of 0.7 percent to the home entertainment market, which reached $18.22 billion. There were some substantial losses in terms of sales and rentals alike of physical media, and the market is still well below its high-water mark reached in 2004, when the market realized $22 billion.

Studios discovered great value in terms of digital movie releases, particularly in terms of offering up what amounted to, essentially, a kind of digital premium in which users could download a movie in HD well before the physical market could get hands on the same title. For instance, one of 2013's biggest sellers—and the top selling title online that same year—was Universal's “Despicable Me 2”, available online for fully two weeks before its DVD release.

There are many, of course, who want the physical copy. But there does seem to be something in offering the release slightly faster to those who won't wait, and offering it on terms that are better to the studio overall. Best of all, the studios are happy about this development as well, as online movie sales are the studio's highest-margin product alongside Blu-ray, even with prices slightly reduced to $15 to $20 a title.

Better yet, digital purchases now comprise around 10 to 15 percent of home entertainment revenue. Physical renters and buyers alike have found wait times to be a little difficult; the kiosk-based DVD rental business personified by Redbox lost one percent last year to reach $1.92 billion in total revenue. But this was after two years of excellent growth, including 31 percent in 2011 and 16 percent in 2012.

However, there's one point raining on the purchase parade, and that's subscription-based streaming. Netflix still leads the way on that front, and revenue for the category is up 32 percent to $3.16 billion. All this together adds up to a few important points to note, perhaps tops among same is the rapid increase seen in home theater. Looking at theatrical box office receipts even over the last five years shows numbers that are holding comparatively steady without a lot of movement; in 2008, according to Box Office Mojo, total box office take was around $9.6 billion, while in 2013, it was $10.9 billion. By way of comparison, box office take has only just doubled the level seen in 1990, and anyone who remembers 1990 movie ticket prices knows the difference between 1990 and 2013.

Home theater products are seeing spectacular gains, while the theater as a whole is keeping comparatively static levels. Streaming's popularity shouldn't go unnoticed either, and with clear gains ahead, it's clear that for movie buffs in increasing numbers, home is where the heart is, and the home theater market is where the eyes are going as well.

Edited by Cassandra Tucker

Contributing TechZone360 Writer

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