New GfK data says far fewer people are buying and renting digital video compared to physical discs. This might lead you to think that physical media still dominates home entertainment. Nothing could be further from the truth.
GfK’s new infographic on physical versus digital video in the U.S. makes for good headlines. Unfortunately, it also gives a seriously distorted picture of what is actually happening. Here are 3 key points made in the infographic, and why they could be misleading.
GfK headline: Digital not as popular as discs/VHS once was
Alternative headline: Consumers trade physical ownership for digital access rights
However, the real reason digital sales and rentals aren’t growing faster is because of SVOD. Most people today have access to large libraries of movies and TV shows from Netflix, Amazon, and Hulu. GfK acknowledges this, stating that 78% of people that have never rented or bought digital video are streaming it.
To put things in perspective, the Digital Entertainment Group says that subscription streaming generated $1.5B in revenue in Q2 2016. That’s double the revenue it generated in Q2 2013, and 25% more than discs sales in the same quarter. Simply put, people are trading physical ownership for access rights to large libraries of content.
GfK headline: People are buying and renting video, just not online
Alternative headline: Discs still lead digital in sales, but continue to slide while digital grows strongly
GfK says 32% of people have rented a digital video and 30% have purchased a digital video. The company contrasts this with 54% that have rented a disc and 68% that have bought one.
DEG data somewhat supports the GfK survey results. DEG says that in the second quarter of 2016, physical disc sales in the US were $1.2B. Physical disk rentals were $643M in the same period. On the other hand, electronic sales of digital movies and shows were $466M and rentals were $518M in the same quarter.
So, people are still spending more on renting and buying discs than they are on renting and buying digital video. That said, the two media types are on very different trajectories. Physical discs sales have declined 18% since Q2 2013, and rentals are off 34%.* During the same period, digital rentals have increased 9% and digital sales are up 80%.
GfK headline: The pros and cons of digital video
Alternative headline: Hollywood stacks the deck in favor of disc sales
Among those that have purchased digital video, GfK says that 12% like the fact that it can be watched anywhere at any time. When digital and physical buyers were asked why they bought less digital than DVDs, 18% said they like the availability of the hard copy.
The truth is, Hollywood continues to favor physical disc sales over digital. The most obvious way it has done this is by stopping new releases from being made available for rental through Redbox kiosks. For most releases, people must wait at least a month before they can rent it. In other words, to watch the latest movie you must buy it.
Of course, a consumer could buy a digital copy, but she would be smarter to buy the disc. There is a schism in the world of digital movie ownership between Ultraviolet and Disney Key Locker formats. The two aren’t compatible: buy in one format and an owner is locked into that ecosystem to play it. As well, there is no single format for bonus features in the digital world. Once again, if a digital movie includes bonus features, they aren’t portable.
That might partially explain why GfK finds such a difference between physical and digital video library sizes. The average personal digital library has 23 titles, while the average number of disc titles owned is 87.
The real headline: 57% of home entertainment spending goes to digital media
Why it matters
New GfK data might leave you with the impression that physical media still dominates US home entertainment.
US consumers do still spend a lot on physical disc purchases and rentals.
However, they spend much more on SVOD services, and digital video purchases and rentals.
*Revenue from disc sales showed a small year-over-year increase in Q2 2016. However, this was due to an increase in disc prices, not an increase in disc sales.