Finance

Report: Netflix Availability Bad News for Movie, TV Spending (MESA)

Once Netflix becomes available in a region, everyone else who deals in the sale of movies and TV is hurt, according to a new report, and spending on Netflix doesn’t make up the overall difference in content spending. The report from IHS looked at the first year Netflix was available in the U.S. (2007), and saw that spending on buying and renting movies and TV series on DVD was already falling by an average of 1.2% a year. But since 2010, once Netflix became widely available across devices, spending has dropped by an average of more than 10% a year, the research firm found…

“The data shows that Netflix’s entry into a market has a noticeable effect on consumer behavior, even in countries where they already had access to other streaming video services,” said Helen Davis Jayalath, senior researcher at IHS Technology. “Movies and TV shows are not only the biggest draw for Netflix subscribers, they are also the backbone of the home entertainment industry, generating 80% to 90% of the business in most countries.”

The year before Netflix launched in the U.S., consumers spent nearly $21 billion buying and renting movies and TV content, but by 2015, total spending on those two genres (including via transactional and SVOD services, was down 17% to $17.3 billion.

And it’s not just the U.S.: in the U.K. disc sales have dropped by more than 50% since the first SVOD services were launched in 2008, but the steepest annual decline (14.5%) happened in 2012, the year Netflix debuted there. Additionally, rentals of TV shows have been down almost 75% since Netflix hit the U.K. Netflix isn’t the only culprit, of course: in 2008, Amazon invested in (and later acquired) the SVOD service LoveFilm, which also took a toll, IHS reported. Total spending on disc content today in the U.K. is £82 million a year ($114 million) less than it was before Netflix, and down over 20% (£474 million, or $660 million) since Amazon’s investment in LoveFilm.

“British consumers have taken Netflix and SVOD to their hearts,” Davis Jayalath said. “Last year, they spent £1.8 billion on buying and renting movies and TV content, more than 26% of which was generated by SVOD services.”

With Netflix now available in both Australia and Japan, IHS is watching to see if the streaming service has the same impact there that it’s had out west. “The key to success in Japan, however, is not U.S. movies and TV shows, but domestic content,” Davis Jayalath said. “If Netflix can invest enough in original Japanese anime content to tempt consumers away from DVD rental it will have achieved something that has so far eluded not only the Hollywood studios but also a dozen other SVOD operators.”