Buying and Renting Movies and TV Shows Online—Legally! It’s a Big Business and Getting Bigger. Rentrak Is There to Prove It.

Movie studios and TV networks are realizing there is a way to collect revenue on the Internet for their content directly from consumers. (Rentrak has been collecting this data since 2006 and we are permitted to show some of this data from 2012 onwards.) There are two main methods used. Pardon me while I go into “lingo land” so that you know what I am talking about:

EST = Electronic Sell-Through

  • The purchase of digital content by a consumer who pays a one-time fee for a perpetual license to view the content. EST is essentially the digital equivalent of buying a DVD or Blu-ray Disc (BD).
  • EST content may either be downloaded or streamed through services offering access to a virtual locker.
  • Major data providers include Apple’s iTunes, Amazon, Best Buy, Google Play, Microsoft, Sony PlayStation, and Walmart’s Vudu—to name but a few.

iVOD = Internet Video On Demand

  • The rental of digital content by a consumer where a fee is paid for a pre-determined window of time in which that specific content can be viewed an unlimited number of times. iVOD is the digital equivalent of renting a DVD/BD.
  • iVOD content may either be downloaded or streamed.
  • See above for major data providers.

Let’s first take a look at EST movies. What has been the trend in buying movies on the Internet? (Or from the cloud, which sounds cooler—am I showing my age?)

EST Chart

As the chart above shows, selling movies online is becoming a pretty good business for the studios. (Rentrak captures information from the seven major studios plus a number of independent studios). Since the beginning of January 2012 to April 2014, the number of movies sold online has virtually doubled. In addition, there are peak periods around Christmas—for gift giving—as well as when specific “hot titles” hit, like Disney’s “Frozen” did in March of this year.

However, the rental of movies online has not shown the same growth rate as purchasing—growing only about 25 percent since January 2012 as shown in the chart below. There is a key reason for this. Because EST margins are much bigger for the studios than either digital rentals, or DVD/BD sales/rentals, the studios are providing movies via EST with an early release window—usually 1-2 weeks prior to VOD, iVOD or DVD/BD. Bottom line, studios are hoping to bolster EST with early windowing for tent-pole titles and key independent titles. Consumers have an access-first mentality; if they can get the movie now, why wait? It’s the consumer preference for going to see a movie on the opening weekend expressed in a digital age.

iVOD Chart

In terms of TV shows, we can only show information on EST, because TV shows are not available via iVOD, which existed only as a short experiment by Apple with ABC/Disney as the only studio signing on. In regards to EST, the chart below shows that purchasing TV programs via the cloud has grown at about the same rate as movies—doubling since January 2012.

Web-based Order Volume Chart

And this is not just an online phenomenon. Major “traditional” video content distributors like Comcast and Verizon FiOS now provide an EST option for their customers. In fact, Comcast had a public success of its EST launch with the announcement that it took the number one spot in digital sales of Universal’s “Despicable Me 2″ in early December 2013.

I think that it is very interesting to see how careful (and smart) the video content providers are being in this digital age. Compare the growth in the digital sale of movies and TV shows in the past two years with sales and downloads of music. As reported by Billboard in first quarter 2014, digital music sales were down 13.1 percent and CD sales were down 20 percent. In comparison, video providers have been carefully managing their content, looking to maximize revenue as the consumer shifts from physical ownership of video to virtual consumption. Digital does not have to equal death. Digital can equal dollar$.

In case you don’t know, I am Bruce Goerlich, Chief Research Officer at Rentrak, the global standard in movie measurement and your TV Everywhere measurement and research company. I have been in the research end of the marketing business for more than 30 years primarily on the ad agency side, with my last stint prior to Rentrak in the role of President, Strategic Resources Zenith Optimedia North America. Somewhere along the way I morphed from young Turk to old fogey. Now that I have grey hair and am horizontally-challenged, I can speak with some authority on advertising and research issues—which I will do from time-to-time on this blog.


6 thoughts on “Buying and Renting Movies and TV Shows Online—Legally! It’s a Big Business and Getting Bigger. Rentrak Is There to Prove It.

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