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Spending on Digital Entertainment Tops Spending on Physical Media

It had to happen eventually, but it happened a lot more quickly than many people expected. Spending on digital sell-through, video-on-demand rentals and video-on-demand subscriptions accounted for 52% of all home entertainment spending in the second quarter of 2015.

Just two years ago, in the second quarter of 2013, home entertainment spending on physical media like disk sales, rentals and subscriptions accounted for 62% of all home entertainment spending, according to researchers at The Digital Entertainment Group and reported at nScreenMedia.

In the second quarter of this year, home entertainment spending was up about 1% to $4.07 billion compared with the second quarter of 2014. But electronic sell-through rose more than 19%, subscription streaming rose more than 26% and total spending on digital entertainment rose more than 16% to $2.12 billion, or 52% of all spending on home entertainment.

The researchers noted:

Consumer spending on home entertainment in the first half of 2015 was driven by double digit growth in key digital categories. Consumers continued to embrace the convenience and accessibility of purchasing and collecting digital content, with studios reaping the higher margins that come from digital sales.

Subscription video on-demand (SVOD) is rapidly catching up with rental and purchasing spending on physical disks. In the second quarter, SVOD spending rose to $1.2 billion while sales of physical disks fell by more than 8% to $1.65 billion.

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nScreenMedia noted:

The good news in all of this for the industry is that the amount US consumers are spending on home entertainment has remained relatively stable for the last 4 years, at around $18 [billion]. How consumers spend that money has changed dramatically in the last two years. In 2013, 43% went to buying disks, 17% to SVOD services and 16% to disk rentals. By the end of 2015, nScreenMedia estimates that disk spending will still occupy the top slot, though with a much diminished 34% share. SVOD spending will have grown to 28% and disk rentals fallen to 13%.

The times they are a-changing again.

By Paul Ausick