Who buys or rents videos, when you can stream through Netflix and other services? With streaming video now rapidly expanding abroad, the worldwide DVD industry might be poised for collapse.
In the US, the world’s largest-home entertainment market, physical video sales have plummeted over the past few years. In 2007, the year Netflix launched its streaming service in the US, Americans spent more than $22 billion on DVD and Blu-ray rentals, the bulk of which were movies and TV shows, research firm IHS Technology, told Quartz. In 2015, they spent less than half—just $9.7 billion—on those physical-video formats.
There’s a similar downward trend in DVD sales in the UK. Sales of movies on disc have more than halved there since 2008, when the first streaming-video on-demand services—Amazon, followed by Netflix—came to the country, IHS found.
Streaming video isn’t the only thing to blame for the decline in DVD sales. The disappearance of video-rental stores like Blockbuster, pressure on retailers to lower video prices, and the growing popularity of other forms of online entertainment, like video games, have also played a role. But the proliferation of Netflix and other streaming and video-on-demand services is the main force accelerating the shift away from physical DVDs, the research firm said in a February report, which measured global spending on movies and TV.
“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, in a statement. “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.”
With Netflix now in 190 countries, the vast majority of which it entered within the last two years, the Netflix effect is likely to ripple outwards. Australia and Japan, two other big DVD markets Netflix entered last year, are particularly vulnerable.
Last year, Australia’s DVD and Blu-ray video business was worth about $1 billion. That seems minuscule compared to the US, but it’s still the fifth-largest market in the world, according to IHS. And viewers there have similar content preferences to those in the US and UK, IHS said, making it easy for Netflix to penetrate the market. Unfortunately for those in Australia’s DVD business, that also means sales and rentals of movies and TV shows there will probably dwindle as they have in the US and UK.
Japan—the second largest DVD market in the world—is a little different, because viewers there are more partial to domestic content. But Netflix could still do some damage to the DVD business there. The company did its homework before launching in Japan last September, bumping up its share of local-made content to about 40%, compared to 20% elsewhere. And it’s using its wealth of global data to improve personalized recommendations in niche categories like anime, which is popular both in Japan and around the world.
“If Netflix can invest enough in original Japanese anime content to tempt consumers away from DVD renta,l it will have achieved something that has so far eluded not only the Hollywood studios but also a dozen other [streaming-video-on-demand] operators,” Davis Jayalath said.