Netflix killing physical video | Media Analysis | Business
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A clear correlation has emerged between the launch of Netflix and the decline in video spending, according to research from IHS Technology.

Netflix origcontnetIn its latest report measuring spend on films and TV shows, Did Netflix Kill the Physical Video Market?, the media analyst found that before Netflix launched its streaming service in the USA in 2007, spending on buying and renting movies and TV series on DVD was falling by an average of 1.2%. Since 2010, the year in which IHS says Netflix access became ubiquitous across the US consumer electronics sector, spending has fallen by an average of 10.3% a year.

“The data shows that Netflix’s entry into a market has a noticeable effect on consumer behaviour, even in countries where they already had access to other streaming video services,” explained Helen Davis Jayalath, senior researcher at IHS Technology. “Movies and TV shows are not only the biggest draw for Netflix subscribers, they are also the backbone of the home entertainment industry, generating 80-90% of the business in most countries. The year before Netflix launched its streaming service in the USA, consumers spent $20.9 billion buying and renting movies and TV content, the most ever recorded. But by last year, total spending on these two key genres, including via transactional and subscription VOD services, was down by 17% to $17.3 billion.”

Across the Atlantic, said the data, UK sales of films on disc have more than halved since the first subscription video-on-demand (SVOD) services such as Netflix launched in 2008, with the steepest annual decline, 14.5%, experienced in 2012, the year the service launched in the country. IHS also noted that the downturn in sales and rentals of TV series has been even more significant, calculating that sales of box sets and other TV programmes on disc have been falling by over 14% a year since 2012, but rentals of TV shows falling off a cliff, down by almost 75%.

Amazon’s investment in and subsequent acquisition of local VOD service LOVEFiLM has also had a detrimental effect on the UK physical media market. IHS says total spending is now £82 million a year less than it was before Netflix launched and down over 20% to £474 million since Amazon’s LOVEFiLM play effectively kick-started SVOD in the UK.

“British consumers have taken Netflix and SVOD to their hearts,” Davis Jayalath added. “[in 2015] they spent £1.8 billion on buying and renting movies and TV content, more than 26% of which was generated by SVOD services.”

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