SVOD the star of struggling US home entertainment industry in 2016

Some good news for the home entertainment industry – depending upon which segment of the industry you’re part of: Consumers spent nearly $18.3 billion in 2016, a 2% increase from 2015.

Subscription streaming services were the stars in 2016’s numbers, with revenues growing some 23% to $6.23 billion in consumer spending, industry group Digital Entertainment Group reported. It was the first time that streaming revenues outpaced higher-margin video disc sales, which came in at $5.4 billion.

Hollywood also saw some light at the end of the tunnel in the form of VOD rentals, up 5% in 2016 to $2.1 billion after being off 3% in 2015. That gap could be even larger when Amazon Prime Instant Video’s subscription revenues are factored into the total, something that didn’t happen this year, DEG said.

After years of strong growth, meanwhile, online sales of video from etailers like Amazon and iTunes slowed significantly, although they remained up about 5%. That segment saw 18% and 30% growth respectively in 2015 and 2014. Electronic sell through (EST) globally has shown softness as consumers have found more premium content available sooner on SVOD services.

But revenues from movie and TV show sales and rentals were down 7% from a year ago to $12 billion.

The biggest loser (no surprise here) was physical rentals, down 18% to $2.47 billion. Sales of DVDs and Blu-ray discs fell to $5.49 billion, nearly 10% less than in 2015.

That’s putting more pressure of Hollywood to find new sources of revenue, especially as theater attendance continues to be flat at best.

The bottom line: Viewers are increasingly moving online for their video entertainment, a move that likely will increase the number of mergers and partnerships between operators and content providers, like AT&T’s efforts to acquire Time Warner. The declining revenue trends for traditional distribution likely also will prompt studios to weigh changes – likely shortening – to the current theatrical windowing norms.

Stay tuned.

Jim O’Neill is Editor of Videomind and Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn