Online video expert Jim O'Neill, who is Editor for industry blog FierceOnlineVideo, just published an editorial titled "DVDs Are Dead, Long Live Online Video," in which he discusses the tectonic shifts taking place in the world of consumer consumption of movies. O'Neill cites to new research from research firm IHS that concludes that 2012 will mark the first year that Americans will pay to legitimately watch more movies online (via Netflix, Hulu, Amazon and others) than via all forms of physical media combined (DVD, Blu-ray, VHS). And, not by a little. IHS projects U.S. online viewing of movies to rocket up to 3.4 billion in 2012 (which represents a massive surge from 1.4 billion in 2011, blowing past 2011's physical media number of 2.4 billion).
According to Dan Cryan, Senior Principal Analyst of Broadband and Digital Media at IHS, "The year 2012 will be the final nail to the coffin on the old idea that consumers won't accept premium content distribution over the Internet."
Perhaps not surprisingly, 94% of all paid online movie watching in the U.S. is via "all-you-can-eat" subscription models offered by Netflix and others -- and only 1.3% flow from the ownership model of electronic sell-through. And, while I personally remain long-term bullish on the movie studios' ultimate ability to monetize more significantly in the online world than they have historically in the physical media world, they are significantly challenged at this still-early point of disruption. Specifically, IHS reports that the movie studios generate only $.51 per movie in the paid online video world vis-a-vis $4.72 per movie for physical media.