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Online movie downloads up nearly 40% in 2010, surpassing TV sales for first time

February 7, 2011 | 12:22 pm

U.S. consumers spent $385 million buying and renting movies via the Internet in 2010 --up 38% from the year before -- surpassing for the first time the amount paid for online television shows.

According to research from IHS Screen Digest, the market for Internet television episode rentals and purchases last year was $366 million. In 2009, spending on online movies and TV was $280 million and $295 million, respectively.

The shift reflects the growing number of ways consumers can access movies through devices such as video game consoles, set-top boxes and the iPad at the same time that Hulu and other free streaming websites make it less appealing to pay to download TV shows.

The growth of the digital market came amid an overall downturn for the home entertainment market last year, with revenue down 3% to $18.8 billion and sales and rentals of traditional DVDs down 11% to $14 billion.

2010 also saw increasing competition in the digital movie market, as the grip of Apple Inc.'s iTunes slipped and other rivals, most notably Microsoft Corp., gained market share.

iTunes' market share dropped to 64.5% from 74.4%, according to IHS Screen Digest, while Microsoft, which sells and rents movies via its Xbox 360 video game console, grew to 17.9% from 11.6%.

Movie downloads on Sony Corp.'s Playstation 3 game console were No. 3 at 7.2%, up from 5.7% in 2009.

Vudu, which was acquired by Wal-Mart Stores Inc. last February, relaunched in November and entered at  No. 4 in the market, according to IHS Screen Digest digital media research director Arash Amel.

The other major competitor in download-to-own and video-on-demand movies is Amazon.com. The online retail giant is currently preparing to launch a subscription streaming service that would put it into competition with Netflix Inc. That model has proved more popular with consumers than paying for individual movies, as evidenced by the breakout success of Netflix.

Although there are no industrywide charts for digital downloads, Apple reported in December that the most popular movies of the year on iTunes were, in order, "The Hurt Locker," "The Twilight Saga: New Moon," "Hot Tub Time Machine," "Iron Man 2" and "Zombieland," according to CNET News.

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-- Ben Fritz

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