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Netflix’s furious growth keeps Q3 entertainment spending from tanking

The Digital Entertainment Group noted recently that even though American household spending on home entertainment was flat year-over-year in the third quarter, there were dramatic shifts between different categories. BGR sister site Deadline reports that sales of discs, digital movies and television programs declined by more than 7%, while rentals were up by more than 16%. Americans are rapidly turning from owners of content into renters of content. This is not necessarily great news for Hollywood, since selling a $40 disc is far more profitable in the short term than renting a movie on demand for $1.99. Yet in the long term, rental income could turn into a torrent if it keeps growing rapidly enough.

As a direct result of Netflix’s momentum, American consumers increased their spending on subscription streaming by 33% over the past year.

Surprisingly, spending on Video On Demand (VOD) services grew by only 2.8%. Just a year ago, VOD spending was still rising at a brisk annualized rate of 8%. It may be that Netflix’s success has begun to undermine VOD services that belong to various cable channels. Consumers who can access a steadily growing trove of movies and entire seasons of TV series may be less interested in paying for premium content delivered by pay TV companies.

After launching mobile game company SpringToys tragically early in 2000, Tero Kuittinen spent eight years doing equity research at firms including Alliance Capital and Opstock. He is currently an analyst and VP of North American sales at mobile diagnostics and expense management Alekstra, and has contributed to, Forbes and Business 2.0 Magazine in addition to BGR.