IHS: Netflix causes downturn in physical video spend

There is a “clear correlation” between the launch of Netflix and a decline in spending on DVDs and Blu-rays, according to IHS.

The research firm’s ‘Did Netflix Kill the Physical Video Market?’ report said that before Netflix launched its streaming service in the US in 2007, spending on buying and renting movies and TV series on disc was falling by an average of 1.2%.

Since 2010, the year in which Netflix access became “ubiquitous across the US consumer electronics sector”, spending has fallen by an average of 10.3% a year, according to the research.

Similarly, IHS said that in the UK, sales of movies on disc have more than halved since the first SVOD services launched in 2008, with the steepest annual decline, a 14.5% drop, coming in 2012, the year Netflix launched.

Sales and rentals of TV series in the UK have been hit particularly hard, with TV show rentals down by almost 75% and sales of TV shows on disc down by 14% a year since 2012.

“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,” said IHS Technology senior researcher, Helen Davis Jayalath.

“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% to 90% of the business in most countries.”

Davis Jayalath said that the year before Netflix launched its streaming service in the US, consumers spent a record US$20.9 billion buying and renting movies and TV content. However, by last year, total spend, including via transactional and subscription VoD services, was down 17% to US$17.3 billion.

Last year more than 26% of the £1.8 billion that British consumers spent buying and renting movies and TV content was generated by SVoD services, said Davis Jayalath. However, total spending is still £82 million a year less than it was before Netflix launched and down £474 million since Amazon’s 2008 investment in LoveFilm “effectively kick-started SVOD in the UK,” said IHS.