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Transactional entertainment spend slumps as rentals plummet

New data from DEG shows that digital transactional spending took an alarming dip in the second quarter of 2019. Also, the interest in renting movies and shows, either on digital or disc, slumped, with revenue plummeting 24%.

Physical media spending down 21% YoY

Disc rentals and purchases continue their rapid decline, falling from $1.36 billion in Q2 2018 to $1.01 billion in Q2 2019. Disc sales fell 19.3% from Q2 2018 to $716 million. The decline in rental spending increased dramatically from 14% to 24%, with total revenue decreasing to $353 million. By way of contrast, in the second quarter of 2013, disc sales were double what they are today, and rental revenue was almost three-times larger.

Digital Media spending up 16% YoY

Spending on SVOD, digital rentals, and digital sales increased 16% in Q2 2019 over the same quarter in 2018, to reach $4.9 billion. The category is dominated by SVOD, which saw subscription revenue increase 23% over the covered period, to reach $3.9 billion. Digital rentals and sales both declined, reversing four quarters of solid growth. Digital rentals fell 10.6%, to $466 million, and digital sales were down a half-a-percent to $550 million.

Purchase, rental, subscription

The decline in spending on buying and renting movies and shows both accelerated in the second quarter. The amount spent buying disc and digital copies fell 12.1% over Q2 2018, to $1.3 billion. Rentals from stores, kiosks, and online stores fell 16.9% (a big acceleration from an annual decline of 2.4% in Q2 2018,) to $0.8 billion.

Subscription VOD and disc service spending increased 22%, to $4 billion in the quarter. There are two things note with the growth of subscription service spending. Though growth remains robust, it is slowing. The last four quarters have seen annual growth considerably below the previous year. Secondly, subscription disc revenue is tiny compared to SVOD: $77 million versus $3.97 billion respectively.

Where the spending goes

Pay-TV still dominates the home entertainment budget. Almost 74.5 cents of every dollar go to an MVPD or vMVPD, down a penny from Q1 2017. Cable, satellite, and telco TV lost 3.4 cents, while services like Sling TV and YouTube TV gained 2.4 cents. SVOD continues to grow strongly, capturing 12.1 cents of every home entertainment dollar, up 4.7 cents. The box office lost wallet-share, down 1.8 cents to 6.9. Video sales and rentals also shrank, down one cent and 0.6 cents respectively.

Why it matters

Two major factors continue to drive change in the way US consumers spend their entertainment dollar:

  • The switch from physical to digital media
  • The move from ownership and rentals to library access

The rental business – physical and digital – suffered its worst quarter in years.


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