Awhile back it was reported that the iTunes Store is one of the biggest media companies in the world. The iTunes Store generated $8.5 billion in revenue last year, which is more than many of America’s top media companies combined.
Apple has been the tech industry’s pioneer for abandoning physical media, and iTunes is a testament to the success of digital downloads. According to a new report from the NPD Group, iTunes dominates its competitors in terms of online video on demand.
Netflix is winning the subscription-based game, but iTunes leads the race in digital movie purchases and rentals. TV show rentals from the pay-TV operators like Showtime accounted for over two-thirds of video on demand rentals. That’s probably because you can’t really get them anywhere else, at least not yet. Apple is rumored to be working on a TV subscription service that would allow you to pay for channels without the interference of a traditional cable or satellite provider.
Full digital movie purchases (not rentals) accounted for a small segment of the video on demand market at only 16%. Customers clearly prefer to rent or stream content.
Apple is the biggest player in internet-based video on demand (iVOD) with iTunes:
Surprisingly, physical DVD sales aren’t suffering as badly as you would think. Apple has clearly bet against physical disks by removing optical drives in its Macs, but the disk is not dead. At least not yet. Companies like Redbox (who has also gotten into the streaming game) are doing very well.
“There is a significant base of video customers in the U.S. who continue to be comfortable with physical formats, and a large majority haven’t made the complete transition from discs to digital video,” according to NPD. “For the time being, at least, consumers still like to own and rent movies and TV shows on DVD and Blu-ray, even in a world of where connected devices and digital rental, streaming, and ownership options are becoming more accepted and commonplace.”
This probably has a lot to do with the fact that content providers have yet to successfully adapt their business models to the internet. Looking at you, HBO.
- Source NPD Group