Movie Downloads Windfall Fails To Materialize; Is Hulu To Blame?


Credit: lanuiop

Yes Movielink and Cinemanow sucked for a long time, and iTunes never became a huge movie seller. That was 2-3 years ago. So what happened since, as online streaming has taken off? Turns out, not much on the uptick, only downside, in terms of revenues. According to new data coming out later this week from ScreenDigest, the total revenues from downloads came to $291 million in 2009, down from $360 million for FY09 that research firm was forecasting even as late as first half last year. The expected holiday surge never arrived, it says. It looks at data from iTunes, Zune (Xbox) Video Marketplace, *Sony* PS3 Playstation Network, *Amazon* VOD, four of the biggest online/digital sources accounting for 97 percent of the market; iTunes alone has 80 percent share, it says.

What’s missing: online streaming sources like Netflix (NSDQ: NFLX) and Hulu. Neither of them are downloads; also the former is tough to breakout revenue-wise separately as the DVD packages bundle in streaming, and the latter, which doesn’t have a lot of movies, is ad-supported. But these two could also explain some of the slower growth trend: as the number of free options to online streaming video increase (TV network shows and other short form), users are entertaining themselves by other means than conventional movies. Another reason, according to SD analyst Arash Amel: “The reason has been a failure by content owners to grow consumer interest in the digital product.” Meaning they haven’t marketed it well. “We don’t believe the 2009 experience was seasonal, or purely economy related…we consider the problem to be endemic.”

And the analyst doesn’t see anything major changing the equation in the next five year, and “we’re taking a 30 percent+ chunk out of our 5-year forecasts for the total movie downloads business, until we see signs that [download] proposition are being given unconstrained strategic priority by Hollywood.” That means from a forecast of $1.5 billion in 2014, it will now barely reach $1 billion by then, the firm believes.

US online movie downloads market

Download-to-own: $98m
Internet VOD: $24m
Total (DTO+IVOD): $122m

DTO: $144m
iVOD: $69m
Total (DTO+IVOD): $213m

DTO: $199m
iVOD: $92m
Total (DTO+IVOD): $291m

Total (DTO+IVOD): $943m



The marketing focus in the article is absolutely correct. Raise your hands – who wants to watch a movie they’ve never heard of? Now, of that group, how many want to go through purchase and download barriers to get it? What would be the right price? Even for a movie we’ve heard of? What’s the value perception for the privilege of a lesser viewing experience that you have to work at to get? Anyone reading “PaidContent” is already far along a trajectory of digital and media awareness – think, everyone else. I suspect we’re dealing with some subtle and entrenched factors.


This could also indicate a preference for subscription (e.g. Netflix) vs. a la carte purchases, in context of the current prices, which – as William puts out – are too high to appeal to many people.

Luci Temple

I agree with William completely – when content creators work out the right price/benefit ratio for consumers we’ll see more movement.

But hey, I also think it’s a bit of a misnomer to not factor in value of streaming. Personally I’d rather stream a movie than download: here in Australia our download speeds are slower and the price of data higher, so if I just want a one off movie view streaming is a better option.

William McDuff

I’d think the problem with the windfall is that the prices are as high as a normal DVD for the most part, without the extras. Once the prices get reasonable, people will buy.

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