Paid Movie Downloads Follow Digital Music's Lead

Posted on October 29, 2004

Now that legal music services are in full swing -- with entries from perennial competitors Apple and Microsoft, and even Wal-Mart in the fray -- can the movie rental business be far behind? The NPD Group recently reviewed this fledging sector of the entertainment market and discovered that consumers today are reacting similarly to renting downloaded movies from the Web as they did to music during the early days of downloading. While this is good news for the future of movie downloading there is also the threat of illegal downloads. Other studies have suggested that movie companies face similar threats from illegal downloading that music publishers have faced.

Through the first half of 2004, paid movie downloads accounted for only 0.3 percent of video units that were purchased or rented, including traditional channels and pay-per-view (PPV) and video-on-demand (VOD) services, like Movielink and CinemaNow. From a demographic standpoint, 80 percent of those paying to rent downloaded movies during this time were male.

"Looking at digital movie rentals so far this year, we're encountering definite echoes of early consumer patterns seen in the music industry," said Russ Crupnick, president of NPD Music and Movies. "When digital music first became popular, the overwhelming majority of consumers were male; however, over time increasing numbers of women began acquiring digital music. Now that digital music has become more mainstream, women are responsible for purchasing nearly half of paid music downloads. We can expect to see a similar rise among women in the digital movie rental market."

As with digital music, the young adult (18- to 24-year-old) age group is taking the lead in paid movie downloading--for January through June 2004 young adults represented 26 percent of all download rentals. By comparison, this age group represents only 16 percent of overall video/DVD buyers or renters. Just over half of those downloading movie rentals were younger than 35, while over 80 percent were younger than 45.

NPD data show that digital music customers tend to be heavier buyers of music CDs, and that pattern is echoed in digital movie rentals. Those consumers paying to rent digital movies from the Web are twice as likely to be heavy movie buyers (i.e., they purchased seven or more movies in the past three months) relative to consumers who acquire movies though PPV or VOD. In addition, 34 percent also reported being heavy renters (i.e., they rented seven or more movies in the past three months), which is significantly higher than those who used PPV or VOD.

In Q2 2004 Movielink, a broadband VOD service, boasted the largest share of the digital movie rental market with a 33 percent unit share, followed by MovieFlix with 13 percent. Compared to the average mix of genres that are rented or purchased, these consumers were much more likely to obtain videos from the Science Fiction/Fantasy genre. The most popular video downloaded during this quarter was Independence Day, followed closely by Matrix Revolutions, Matchstick Men, Harry Potter and the Sorcerers Stone, and Star Trek Wrath of Khan.

Source: NPD's VideoWatch collects video acquisition information on a continuous basis from members of NPD's consumer panel of more than 2.5 million registered members. Detailed purchase information is collected from an average of 3,000 video buyers and renters each week. This information is balanced to represent the U.S. population, age 18 and older.