nScreenMedia OTT multiscreen media analysis

Amazon TVOD store dominates a shrinking market

Disk and Digital Rental and Sales 2Q revenue 2014-2018

By any measure, Amazon has grown to dominate the transactional video market online over the last five years. However, it is becoming a bigger fish in an increasingly smaller pond.

Amazon video store dominates online sales and rentals

According to industry insiders, Amazon’s video store now dominates the market for rentals and sales. One US cable TV executive says that show rental and purchase revenue from Amazon’s store will exceed Apple TV/iTunes and Google play combined this year.

Another independent film distribution executive says that Amazon has grown so much in the 12 to 18 months that:

“It used to be iTunes would account for the lion’s share or at least half of total revenue, but now that’s being shared between Amazon and iTunes in most cases.”

Looking just at the rental activity, it’s clear that Amazon has out-marketed and out-maneuvered iTunes consistently over the US consumers using Amazon iTunes Redboxlast five years. In the fourth quarter of 2013, according to TiVo data, 9% of consumers said they rented a movie from Amazon’s store, and 6% rented from iTunes. At the end of 2017, 18% said they rented from Amazon and 8% from iTunes.

Transactional business in decline

Though the growth in the transactional video store is certainly good news for Amazon, it is not for the video industry overall. Between 2013 and 2018, the number of people saying they used Redbox fell from 17% to 13%. Consumers are turning away from disk rentals and purchases and are not converting the behavior to the digital world.

Since 2014, total digital and physical video revenue from purchases and rentals has fallen from $2.9 billion in the second quarter of 2014 to $2.3 billion in Q2 2018. According to the latest data from the Digital Entertainment Group (DEG), disk rental and purchase revenue fell 19% between Q2 2017 and Q2 2018 and have fallen 38% since 2014. Second quarter disk sales are off nearly $800 million since 2014.

Digital transactional revenue has not made up for disk losses. Digital sales and rentals have increased 30%, or $250 million, since 2014.

TVOD US market digital and disk share 2014-2018

Amazon still a winner in the market for video

Despite the success of digital transactions through Amazon’s video store, the company has likely seen overall video rental and sales revenue fall. Amazon is one of the biggest sellers of video disks. Given the precipitous fall in disk sales, it is doubtful the growth in digital sales and rentals has grown fast enough to compensate.

That said, Amazon is almost certainly still a winner overall in video since it is a big participant in the growth of the SVOD market. Not only is it benefiting from increased loyalty due to the Prime Video service, but it is also deriving revenue from the success of other SVOD providers. The company’s Channels program is instrumental in driving subscribers to services like Showtime and CBS All Access, and it receives financial incentives for doing so.

Why it matters

Amazon has come to dominate the declining transactional video market in the US.

However, the decline in video purchases and rentals have likely wiped out any gain in revenue the company has enjoyed.

Amazon also participates in the explosive growth of the SVOD market. The additional revenue it brings means the overall video revenue picture at the retailer is almost certainly one of robust growth.

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