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Summary:

Sure, consumers still buy a whole lot of DVDs – but they’re also starting to spend money on movie rentals on their Xboxes and Windows 8 devices.

Microsoft
photo: Corbis

Everyone was focused on the fact that consumers still buy plenty of DVDs and Blu-ray discs when the NPD Group published its 2012 Home Video Data report this week. It’s true: 61 percent of all U.S.-based transactional home video spending goes towards physical media, compared to 64 percent in 2011. But the real surprise to me was to see how much digital media Microsoft is moving these days.

Microsoft made a significant showing in the area of internet VOD, which is industry slang for those 24 or 48 hour video rentals you can get from iTunes, Vudu and others. That segment currently accounts for just 12 percent of total video-on-demand revenue, with 72 percent of the money coming from rentals through pay TV operators. But it’s an interesting segment, in part because it’s not dominated by just one or two players.

Apple’s iTunes does have a strong lead with 45 percent of all internet VOD revenue, according to NPD, but there’s a fierce competition going on for second place: Amazon Instant Video generated 18 percent of the industry’s revenue in this segment in 2012, followed by Walmart’s Vudu with 15 percent and Xbox video with 14 percent.

Internet VOD 2012, according to NPD Research

That’s a pretty strong showing for Microsoft, considering that the company has just begun to put some more muscle behind its own video rental offering. Microsoft just recently unified all of its entertainment offerings under the Xbox brand and is now beginning to promote it as its home entertainment property across all of its Windows 8 platforms, as well as the Xbox 360. I wouldn’t be too surprised if Microsoft surpassed Vudu and maybe even Amazon by the end of this year for internet VOD rentals.

Of course, one has to look at these numbers with a grain of salt: NPD’s home video data focuses entirely on transactional spending, meaning that Netflix and competing subscription offerings don’t show up at all. That’s despite the fact that Netflix now has some 27 million subscribers in the U.S. alone. But subscriptions generally don’t offer access to movies right after they were in the theaters — and that’s an area in which Microsoft, with a pretty big installed device base, is starting to move a lot of media.

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  1. It would be interesting to see the numbers from last year to see how market share has shifted.

  2. What about MVPD VOD offerings

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