Blog Post

iTunes Faces New Threat In Film Rentals

While new data out today from IHS Screen Digest shows Apple’s iTunes is as dominant as ever in the electronic-sell-through business, the source of its stiffest competition this year may be changing.

iTunes grabbed 65 percent of the movie EST and Internet video on demand (iVOD) market in 2010. While down from 74 percent the previous year, iTunes is still far and away the leader, with Microsoft (NSDQ: MSFT) in distant second with 18 percent market share and Sony (NYSE: SNE) in third with 7 percent.

But IHS analyst Arash Amel forecasts that iTunes will see someone else gaining speed in the rearview mirror this year. “The most fearsome rival for iTunes in the future could be a giant company that was only a small player in 2010: Wal-Mart,” he writes, citing the emergence of Vudu in the last quarter of the year.

“The future of the online movie business may come down to competitive battle between Apple (NSDQ: AAPL) and Wal-Mart,” Amel said. “Although Wal-Mart (NYSE: WMT) is not on the charts yet, the company soon will become a major player if its current momentum continues.”

Amel is absolutely correct that Vudu is a real comer, but to reduce this to a two-service race this early in the game may be premature.

Microsoft and Sony are not easily ignored. The single-digit year-over-year growth their console-centric rental strategies garnered was pretty modest by IHS’ measure, but XBox and Playstation remain the most entrenched device solutions in the over-the-top TV free-for-all.

What may be a bigger concern is that the the EST/iVOD space grew 60% over 2010. A healthy gain, to be sure, but it seems like there should be a more explosive figure in its place given the declines of physical DVD rentals. A great stat to get at would be how big the subscription VOD market currently led by Netflix (NSDQ: NFLX) is relative to the iVOD market, but IHS didn’t release total figures.