Consumer home video consumption gained $1 billion in new revenue in 2009 as kiosk rentals added to market share gains at Netflix and moved the needle on rentals to $6.5 billion for the year.
With the global economy in shambles, consumers increasingly sought economical ways to watch the latest hits at home - abandoning purchase additions to their collections in favor of $1/night disc rentals and Netflix value plans. Higher priced Blu-ray discs grew a fairly slight (for a new format) 48%, even accounting for holiday hardware sales, to account for 10% of the overall video market. Total sales of DVD and Blu-ray for the year came in at $12.2 billion.
Kiosks posted eye-popping gains, with 58% year-over-year growth while local stores run by Blockbuster, Hollywood Video/Movie Gallery and others dropped 12.5%. Local stores have an increasingly difficult time competing with the prices offered by kiosks and the high-turnover value of NetFlix.
Redbox), a division of CoinStar (NASDAQ:CSTR), is the largest kiosk operator in the U.S. with more than 20,000 locations throughout the country, in stores like Wal*Mart, Smith's and Albertson's as well as gas stations, convenience stores and McDonald's restaurants. 40% of the disc output, though, representing studios including Universal, 20th Century Fox and Warner are imposing a 28 day delay (from street-date) on Redbox before titles are available. Luckily, other studios including Sony, Paramount, Disney and LionsGate all provide titles to Redbox on street date.
It is widely expected that those studios that currently impose delays on title availability will eventually come around and start supplying their product in a more timely fashion as pressure mounts to fuel all the available distribution options, including digital download. After all, these same studios had a hard time coping with Netflix at first, amidst an active lobby from the likes of Blockbuster and Hollywood/Movie Gallery. In the end, the business that best meets consumer demand - wins out.