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Report: Revenue From Online Video Streaming to Surpass Box Office

Image: Report: Revenue From Online Video Streaming to Surpass Box Office

By Joe Battaglia   |   Thursday, 05 Jun 2014 12:19 PM

A new report suggests that online streaming video services such as Netflix and Hulu will soon be generating more annual revenue than traditional movie theaters.

According to the latest PricewaterhouseCoopers Entertainment and Media Outlook 2014-2018, by 2017 revenue generated by television and subscription video on-demand providers will reach about $14 billion, $1.6 billion more than the gross amount earned from the U.S. movie box office.

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The report predicts that box office sales will increase slightly this year to $11.4 billion, up from $10.8 billion in 2013, and after being more or less flat since 2009. PwC predicts that box office revenue will maintain a 3.1-percent annual growth rate over the next four years, bringing movie ticket sale figures to $12.5 billion in 2018.

However, revenue from subscription video services is growing much faster, from $3.3 billion in 2013 to a projected $10 billion in 2018. Revenue from transactional video services, like iTunes and Google Play, where users pay to rent or buy digital copies of movies or TV shows, brings that total to $14 billion in 2018.

The projected stratospheric rise in revenue will come as the money made by physical home videos falls precipitously, according to the report. The revenue generated by DVD and Blu-Ray rentals and sales dropped by $3 billion between 2009 and 2013. PwC says it will drop by a further $4 billion between 2013 and 2018, from $12.22 billion to $8.72 billion.

It wasn't all gloom and doom for the U.S. film industry in the report. Adjusting for inflation, the total revenue generated by U.S. filmed entertainment will rise to $39.16 billion in 2018, from $31.12 billion.

"For all the turbulence caused by the conversion to digital, and the disruption caused by window compressions, new revenue streams, reduced film slates and competition from global producers, the core economic model of the American film industry remains — to date — largely unchanged," the report states.

The report went on to explain where streaming services will most greatly impact the traditional box office is in release dates. Currently, most movies run for months in the theaters before gradually making their way onto streaming services. PwC believes the strength of streaming companies will pressure the industry to make those transitions faster.

PwC also believes entertainment and media companies need to apply a "digital mindset" in their business strategies moving forward.

"The consumer is now at the center of their own entertainment and media world, pivoting from finding to being found by content experiences via every channel and device," said Ken Sharkey, PwC's U.S. entertainment, media & communications practice leader.

"The battle for relevancy has never been greater as E&M businesses are being joined by companies from other industries, such as retailers, automakers, and utilities to compete head-on for the same consumer relationship.

"E&M businesses may need to look beyond technology, and adopt more flexible business models that allow them to get closer to the consumer. What's important to the consumer is the specific experience – whether it's live or on-demand and on any screen."

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