With more and more legal online movie rental and streaming options available, Americans are quickly flocking to the web for their entertainment. In 2012, people will watch more movies online than they will on physical media such as DVDs and Blu-ray. For the first time in the history of the entertainment industry, more people will consume media via a digital format than a physical one. This shift in the consumption of media marks a shift in Hollywood’s traditional business models.
According to a report from IHS iSuppli released this week, paid online movie views will reach 3.4 billion by the end of 2012, compared to only 2.4 billion for DVDs and Blu-Ray. This marks a drastic change from 2011, when physical media easily outshone online alternatives with 2.6 billion views compared to 1.4 billion for online users. This is a 135% year-over-year increase for Internet-based entertainment, a trend IHS expects to steadily increase over the next several years.
In the report, IHS senior analyst Dan Cyran writes, “2012 will be the final nail to the coffin on the old idea that consumers won’t accept premium distribution over the Internet.” Cyran is, of course, referring to distribution services such as Netflix, Amazon Instant Video, and iTunes. In addition to providing users with high-quality digital media, each of these services also offer the ability to view media on a variety of devices, including desktop and laptop computers, TVs, smartphones, and tablets.
In addition to the convenience online media offers, the IHS report also indicates an economic drive behind the success of online media. With online movies, customers pay an average of $.51 per movie. That price skyrockets to an average of $4.72 for physical media.
In short, online media is here to stay. It’s more convenient, less expensive, and (usually) higher-quality than standard DVDs. Hollywood is quickly changing its business models to include quicker online access to TV shows and movies via streaming deals with services like Netflix and Hulu. Now if we could only get ISPs to get rid of bandwidth caps, then we could go crazy with HD streaming.