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Netflix Surpasses Apple to Lead U.S. Movie Online Business

13 Jun, 2012 By: Jackie Jones

EL SEGUNDO, Calif. – Netflix Inc. has officially bypassed Apple Inc. to become the largest U.S. online movie service in terms of revenue, according to the HIS “Screen Digest Broadband Media Market Insight Report.”

Netflix’s share of U.S. online movie revenue increased to 44 percent in 2011, up from less than 1 percent in 2010. Though Apple continues to enjoy strong revenue growth, its share of total revenue declined to 32.3 percent last year, down from 60.8 percent in 2010.

“2011 marked a sea change in the online movie business that saw the balance of consumer spending shift from a DVD-like transactional model to more TV-like subscription approach,” said Dan Cryan, research director for digital media at IHS. “The online movie business more than doubled in 2011 to reach $992 million and it is expected to double this year as well.”

This is positive news for Netflix, which in the beginning of this year suffered in customer satisfaction reports, according to a separate ForeSee study (Response This Week, Jan. 4). In the ForeSee annual Holiday E-Retail Satisfaction Index, Amazon climbed two points to score 88 out of 100 on the study’s scale – the highest from any retailer in 14 consecutive studies – while Netflix’s customer satisfaction plummeted to 79, a 7-point drop.

Netflix weathered a bit of bad press last year for what a majority viewed as costly blunders by the company, including price hikes and structure changes. Meanwhile, Amazon’s expansion into various markets has helped it fare better with consumers amid economic hard times, ForeSee reported. However, the HIS report suggests a turnaround for Netflix.

“We are in the midst of a significant change in the way people pay to consume movies online,” Cryan said. “All the significant growth in revenue in the U.S. online movie business in 2011 was generated by rental business models, which provide temporary access, not permanent ownership. Rental delivers unlimited consumption with a low monthly fee for older titles as well as cheap rental of new releases, providing the kind of value that online consumers want.”

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