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Thursday, January 31, 2013, 12:28 pm PT (03:28 pm ET)

NPD: Apple's iTunes takes biggest piece of online video on demand pie

As sales of Blu-ray disc and DVDs continued to slip, Apple has taken the leading share of the emerging Internet video on demand market, according to a new report by The NPD Group.

NPD issued a report today, noting that conventional discs have dropped from 64 percent of the home market in 2011 to 61 percent in 2012, blaming lower average prices of discs as contributing to share declines.

In contrast, the market for digital downloads not tied to a physical disc is growing, from 14 percent in 2011 to 16 percent of the home market in 2012. Video on demand (VOD) services have also increased, growing from 11 percent to 12 percent of the consumer movie market across the last year.

The majority of VOD movie purchases and rentals (72 percent) is served up by pay TV operators. However, NPD called attention to "electronic sell through" (EST, aka digital downloads) which makes up 16 percent of VOD market, as "widely seen to be the next generation video-ownership option." The firm also called attention to Internet VOD (iVOD, aka online digital rentals), which now makes up 12 percent of the VOD market.

NPD states that Apple's iTunes "dominates the [larger] market for movie EST" but says there "is more competition for iVOD rentals."

NPD Internet Video on Demand


Among these online movie rental competitors, Apple now takes 45 percent of unit share, followed by Amazon's Instant Video with 18 percent, the Walmart-owned Vudo with 15 percent, Microsoft's Zune/Xbox with 14 percent share, and other players (including Google Play and Sony's PlayStation Store) splitting the remaining 8 percent (no other player can command more than a 5 percent share).

Two years ago, IHS reported very different numbers for the Internet VOD market, assigning Apple a 64.5 percent share, Microsoft a 17.9 percent share, and giving Sony third place with 7.2 percent share.

The two market research companies likely use different criteria in calculating sales, but if they outline the market with any accuracy, it would appear that the market is now supporting a greater number of nearly equal competitors in addition to Apple, at least in the movie rentals market. It also appears consumers are using dedicated game consoles less for movie rentals, and turning instead to web and mobile-savvy platforms.

Apple began selling movies and TV shows on the iTunes store in 2006, and started offering movie rentals in 2008. TV show rentals for 99 cents, with limited partners, began in 2010.

Microsoft's Xbox Video Store and Amazon's Instant Video on demand (then branded as Amazon Unbox) were both launched in late 2006. Vudu was launched in 2007, and acquired by Wal-Mart in 2010.