iTunes Leads Share of Online Video Market (Research)

Share of U.S. video download market in 2012. The red bar represents share of TV episode downloads. The blue bar represents share full-length feature film sales. Source: The NPD Group Inc.

As the music industry seeks to increasingly monetize its content over video formats, it is finding a familiar retail partner -- Apple’s iTunes.

The store, which launched a decade ago and within five years became the world’s largest music retailer, is now dominating the market for digital video as well, according to a report released Tuesday by the NPD Group Inc.

iTunes accounted for 67% of TV show sales in terms of units in 2012, NPD estimates. For feature films, iTunes had a commanding 65% share of the market. This roughly mirrors iTunes’ slice of the market for digital music downloads, which ended 2012 with a 63% share, according to figures NPD released last week.

Apple also leads in on-demand video rentals as well, though not as dramatically. iTunes rented about 45% of Internet videos on-demand last year. Amazon’s Instant Video accounted for 18% of online rentals, Vudu had 15% and Xbox Video, which makes rentals available via its Xbox 360 game console, came close behind at 14%.

Russ Crupnick, NPD’s senior VP of industry analysis, credits Apple’s early entry into digital content verticals for its success. Apple began offering TV episodes and music videos in October 2005, selling more than a million videos within three weeks. In September 2006, Apple began selling feature films. Later, in January 2008, it dove into the on-demand video rentals business.

“Apple has successfully leveraged its first-mover advantage and of iTunes, iOS and the popularity of iPhone and iPad to dominate the digital sale and rental markets for movies and music,” Crupnick said. “While worthy competitors have come along, no other retailer has so thoroughly dominated its core entertainment product categories for so long.”

Apple’s also had some success in getting its music buyers to purchase videos and vice versa. According to NPD’s “Entertainment Trends In America” report released in March, 58% of those who rented a movie from iTunes also bought a music download in the previous three months.

In other words, iTunes seems to have found an effective way to up-sell a music customer to, say, a concert or music video or an app. 

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