Video retail revenue sees sharp declines at hand of Internet video growth, In-Stat says

Over-the-top video rental and delivery is taking a bite out of home video retail revenue and is responsible for double-digit decline in retail sales of physical DVD discs, according to recent research from In-Stat.

The research firm, which is being acquired by the NPD Group, forecasts that the drop in retail sales of physical discs will be sizable: some $4.6 billion from 2009 to 2014. Online, digital paid video downloads and streaming segments, which include purchases and rentals, will see high revenue growth. Within five years, annual revenue is expected to grow from $2.3 billion to $6.3 billion, according to In-Stat.

In-Stat also sees intense competition between online à la carte rental of TV episodes and online subscription TV services, such as Hulu Plus and Netflix. Such picking and choosing also may detrimentally impact the use of TV-everywhere services. Additionally, competition will come from paid online video stores, such as Apple iTunes, Amazon, Vudu and CinemaNow, according to the research firm.

“Netflix is already shifting its focus to online streaming, and Redbox is evaluating a similar strategy,” said In-Stat principal analyst Keith Nissen. “The convenience and utility of the online offerings are simply too compelling.” Ultimately, physical disc kiosks will be unable to compete with the in-home and in-store download to rent, he added.

According to In-Stat research, U.S. TV download revenue will more than triple between 2010 and 2014. The research firm also is forecasting online VOD subscription revenue to approach $3.5 billion by 2014.