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Netflix’s furious growth keeps Q3 entertainment spending from tanking

November 4th, 2013 at 4:20 PM

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.

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