The world online movies market is forecast to reach $4.44 billion by the year 2017, according to new report by Global Industry Analysts (GIA). Growth in the post recession period will be driven by continued penetration of broadband Internet, rising consumer spending on digital rentals, and introduction of advanced 3D to home markets.

The report – Online Movies: A Global Strategic Business Report – suggests that movies are today a part of the mainstream media and entertainment industry. Movie downloads using the Internet are growing rapidly and has become much more practical with the rising penetration of broadband, and newer age computers with larger hard drives. A full-fledged industry in itself, online movies are gathering critical mass both in terms of number of movie titles, and customer base. Until recently, the limited playback options of movie downloads, low quality, and the trouble of getting movies off a desktop PC to watch onto the big television screen made them unrealistic for home theatre use. With a flurry of new Internet-ready set-top boxes from players such as Apple and Netflix has provided consumers the ability to quickly download and play movies in their personal home theatre.

Consumers now are empowered to browse thousands of movie titles, select a movie for purchase or rental, and watch it on home television without a PC, notes GIA. Prime factors fingered to have played instrumental roles in pushing the online movies market into the bulge bracket include the skyrocketing popularity of movies, increased penetration of TVs and DVD players, rising level of interest in digital downloads, surging movie ticket prices, increasing credit card usage, the ability to play mobile trailers and videos on point-of-access devices, such as, PDAs, cellular handsets, and iPods, and rising cost sensitivity of consumers in current economic conditions. Growth in the upcoming years will be driven by continued consumer demand for digital content consumption, and launch of new hardware integrated with next-generation features.

GIA suggests that despite the dampener cast by the economic recession, the online movie industry was less affected by the financial market conditions because it is one of the cheapest forms of entertainment. Unlike other industries where growth remained stunted, online movies in the world market witnessed slower yet continued gains. With consumers turning in favour of digital downloads for both convenience and cost savings, growth in the market has managed to record hardy gains despite an undeniable slowdown in growth momentum. However, the overtly built up hype around online movies from the beginning of the new millennium, is finally being punctured by the surfacing industry realities that highlight a disappointing disparity between the industry’s push and user demand. Although online movies have been increasing in popularity, they are unlikely to provide content owners with a primary revenue stream at least in near future. Even with the increasingly growing audience of online consumption, and number of unique visitors and content views continued to surge, revenues from online movies downloads are not expected to witness the stellar growth experienced in the previous years. Also, as recession-weary consumers switch to cheaper rentals from Netflix, resulting in lower revenues for the Hollywood studios.

GIA reports that Europe and United States accounts for a lion’s share of the global Online Movies market. Rising penetration of broadband Internet has additionally encouraged the uptake of online movies in developed markets, such as, Europe, and the US, and extending traction to the trend is the launch of device-based services. While Europe, and the US have long dominated the online movies market, Asia-Pacific has been turbo-charging global growth in recent years, primarily due to factors such as rising broadband penetration, huge populace of Asia, and the resulting gargantuan size of subscriber base. The increasing popularity of video-on-demand (VoD) rental service can be linked to the gradual erosion of support for download-to-own (DTO), or digital retail business. Majority of services operating in global markets have choose to offer titles on a rental basis due to limited availability of download-to-own titles. Also, download-to-own offers no compelling case in terms of convenience or service to drive a mass-market adoption. Migration from download-to-own towards VoD will carry very slim profit margins for their content owners because of the cheaper per transaction cost in the rental business model.

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