Americans will pay more for online videos over discs in 2012: report

The move to digital media content is all the more evident today as a new report from IHS iSuppli reveals that online movie sales are expected to exceed physical copies in the United States for the first time ever in 2012.

Yes, that means legal, digital copies of movies are expected to increase this year to 3.4 billion views or transactions in 2012 (i.e. rentals or complete purchases). That's approximately 1.0 billion units higher than the predicted 2.4 billion payments for physical DVD or Blu-ray disc copies for the year.

The bigger story might be the shift from 2011 to 2012. DVD and Bly-ray disc sales are going to decline from the 2.6 billion transactions in 2011, while online transactions will rise from 1.4 billion last year. That's an annual growth rate of 135 percent.

There are certainly many attributing factors here, ranging from the increasing popularity of the technology supporting online video (i.e. more set-top boxes, Internet-connected TVs, even tablets) to just the sheer amount of digital video available now from major providers such as iTunes, Amazon, Netflix, Hulu, and many more.

One reason that digital video naysayers might have argued before (or still) is that digital video often costs more than a DVD. Another might be that obtaining physical copies of movies is just easier.

Dan Cryan, a senior principal analyst of broadband & digital media at IHS, argued in the report that isn't the case:

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. In fact, the growth in online consumption is part of a broader trend that has seen the total number of movies consumed from services that are traditionally considered ‘home entertainment’ grow by 40 percent between 2007 and 2011, even as the number of movies viewed on physical formats has declined.

Strangely, researchers still predict that Americans will spend more time in front of screens watching DVD or Blu-ray discs rather than streaming or downloading the video content online. Consumers are expected to spend an estimated (and cumulative) 4.3 billion hours over the year with physical video units rather than 3.2 for online movies.

Related:

• Nielsen: U.S., European tablet owners buying more digital content
• NPD: TV shipments dropped in 2011 after six years of growth
• BBC preparing iTunes-style store: Video archive heading online
• Amazon inks deal with Discovery to boost Prime instant video
• Yahoo Movies inks deal with Fandango for ticket sales