nScreenMedia OTT multiscreen media analysis

We just don’t rent movies anymore!

US disc and electronic video sales 2013-2017

Sales of movies and TV shows continue to decline in the U.S. though there are signs consumers are adapting to online ownership. Not so for the rental market. Digital and disc rentals are in full decline.

Movie sales continue to decline

According to new data from the Digital Entertainment Group (DEG), the sale of disc and digital versions of movies and TV shows continues to decline. Between Q3 2016 and Q3 2017 sales fell from $1.54 billion to $1.48 billion, down 4%. The bright spot was a substantial increase in electronic sales which grew 7% to $529 million. Physical disc sales continued their tailspin, tumbling 10% year-over-year (YoY) to fall below the one-billion mark for the first time in any quarter in more than a decade.

Q4 video sales are likely to be lower than the same quarter last year. Disc sales are typically 75% higher in Q4 than in Q3, and electronic sales are 15% higher. Overall, this historical performance suggests home video sales will be around $2.3 billion in Q4 2017, 4% down from the previous.  For the full year, video sales should be around $12 billion, down almost $1 billion from 2016.

Renting video going out of style

US disc and electronic video rentals 2013-2017Renting videos, either discs or through electronic stores, is becoming increasingly uncommon. Renting physical discs through kiosks declined 14% YoY, and brick and mortar store rentals were down 18%. Renting videos through electronic stores fared a little better, though revenue still fell 4% YoY. Overall, rentals generated $650 million in Q3 2017. In Q3 2013, rentals delivered nearly a $1 billion.

Subscription streaming growth slowing?

The expansion of the SVOD market continued in Q3 2017. Revenue from subscription streaming increased 17% YoY, reaching $1.9 billion. However, this is the slowest growth the industry has seen in any quarter over at least the last five years. For the previous five quarters, YoY growth has exceeded 20%.

The slowdown in SVOD revenue growth appears to be entirely down to the performance of one company: Netflix. The SVOD giant reported streaming revenue of $1.55 billion in the US for Q3 2017, accounting for over 80% of DEG’s reported revenue for SVOD as a whole. In other words, as Netflix goes so goes DEG’s reported subscription streaming revenue number. Netflix’ domestic revenue growth took a dip in Q3 2017. For the previous two-quarters revenue grew at nearly 27% YoY but in Q3 2017 revenue growth declined to 18.6%.

What to expect for Q4 2017

US entertainment spending Rent Buy SubscribeTotal subscription revenue for 2017, as reported by DEG, will exceed total videos sales revenue for the first time. Total video sales will be approximately $7.1 billion, and total subscription video revenue will be just shy of $8 billion.

Rental revenue will continue its relentless decline in Q4. It will fail to reach the magic $1 billion mark again and deliver just $4 billion for the year. Last year, total rental revenues were $4.7 billion.

Why it matters

Though electronic sales of movies and TV shows are increasing, they are not rising fast enough to counter the loss in physical disc sales.

The rental market is in full decline with both physical and digital rentals falling in Q3.

SVOD revenue continues to grow although the pace could be slowing.

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