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iTunes dominant in internet VoD, but slipping into a war with Wal-Mart

IHS Screen Digest says that Apple iTunes is winning the US battle for online digital media

By PETER WHITE

Published: 10 February, 2011

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IHS Screen Digest says that Apple iTunes is winning the US battle for online digital media. Well we’re sure it’s right in that it is winning the sales contest for companies selling digital video downloads, but surely Netflix is the real winner, but it just doesn’t operate in quite the same category.

Anyway a report from HIS says that Microsoft and Wal-Mart Stores are doing their damdest to spoil the partly and competition has intensified but Apple still has 64.5% market share compared to 74.4% a year earlier and Microsoft has jumped from 11.6% to 17.9%, with Sony in third at 7.2%.

“The iTunes online store showed remarkable competitive resilience last year in the US EST/iVOD (electronic sell through and internet VoD) movie business, staving off a growing field of tough challengers while keeping pace with a dramatic expansion for the overall market,” said Arash Amel, research director, digital media, for IHS.

“Apple faced serious competition from Microsoft's Zune Video and Sony Corp.'s PlayStation Store, as well as from Amazon and—most significantly—Wal-Mart. However, iTunes managed to grow because of the introductions of the iPad and the second-generation Apple TV, which have spurred the company's movie rental offerings and have invigorated the iTunes multi-screen ecosystem. We expect that in the United States, Apple's strong performance in iVOD will allow it to continue to bypass the video on demand services offered by many major cable operators.”

Competition from Microsoft intensified because of the highly successful launch of its Kinect 3D motion controller system for its Xbox 360 video game console. This resulted in a big fourth quarter for movie revenue on the Zune Video platform, cementing the No. 2 market rank for Microsoft.

Sony in 2010 maintained the number three position in the US market with a 7.2% but the company is facing rising competition in the US from Amazon VOD and Wal-Mart’s Vudu service, IHS said.

Wal-Mart's is now charging 99 cents for internet movies in an aggressive drive for market share, including on the Sony’s PlayStation 3 video game console.

“The future of the online movie business may come down to competitive battle between Apple and Wal-Mart,” IHS said because the company already represents a critical source of revenue for the major Hollywood studios in Blu-ray and DVD sales. Wal-Mart generated $3.5 billion in revenues for the studios from physical sales during 2010. Our own view is that the physical side is shrinking alarmingly and Wal-Mart can only sustain its share by buying other online offerings, and even then they are unlikely to maintain momentum.

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