Consumers now spending more renting movies than buying them

This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.

Hollywood’s home entertainment industry has passed a significant threshold: Americans for the first time since 2001 spent more money renting movies than buying them.

The new balance is the result of a radical shift in consumer preferences over the past few years, fueled by the growing convenience of Netflix and Redbox rentals and spending cutbacks amid hard economic times. It’s also bad news for the studios, because DVD sales are far more profitable than rentals and have filled the coffers of Hollywood the past decade.

New data released Friday by the Digital Entertainment Group, an industry trade association, showed that people spent $4.2 billion renting movies in the first six months of 2011, compared with $4.1 billion buying them on disc or via digital download.

Total consumer spending to watch movies at home dropped 5%, continuing a long-declining trend. During the first half of 2010, spending declined 3.5%.

Comparisons were somewhat difficult, however, as this year’s crop of movies that hit shelves at Wal-Mart and iTunes from January to June generated 16% less at box office than the same period last year. Compared with hits released on DVD in spring 2010, such as “Avatar,” “The Twilight Saga: New Moon” and “The Blind Side,” this spring was short on blockbusters outside of “Harry Potter and the Deathly Hallows — Part 1.”

Comparing the first six months of 2011 with the same period last year, DVD, Blu-ray and download sales dropped 17%, while rentals increased 11%. The fastest growing way to rent movies was via subscription, a category dominated by Netflix, which grew 46% to $1.6 billion. Renting from kiosks, such as those operated by Redbox, grew 40% to $805 million.

Growth in digital purchases and video on demand also slowed in the period. After booming the last few years, both categories grew just 4% in the first half of this year, totaling $1.2 billion in revenue. In the first half of 2010, they grew a combined 23%.

Digital distribution is one of two new technologies, along with high definition Blu-ray discs, that studios are counting on to drive growth. Total spending on Blu-ray increased 10% in the first half of this year. Digital Entertainment Group did not provide a comparable growth figure for 2010.

RELATED:

Netflix hikes prices for many consumers with separate pricing for DVDs, streaming

Redbox revenue, operating income soar

Blu-ray making up for only some of the drop in DVD sales

-- Ben Fritz