Home video sales shrank again in 2016 as Americans switched to streaming

The U.S. home video market declined again last year as more people turned to subscription streaming services like Netflix for their home entertainment needs, providing further evidence of rapid shifts in consumer behavior that has put pressure on Hollywood studios.

Revenue from sales and rentals of movies and TV shows totaled $12 billion in 2016, down 7% from the previous year, according to data released Friday by trade organization Digital Entertainment Group.

Meanwhile, subscription streaming continued its torrid growth last year, surging nearly 23% to $6.23 billion in consumer spending, the group said.

The declines in home video sales have squeezed Hollywood studios that once counted the in-home market as a key driver of profits, adding to broader concerns about the health of a movie industry that has suffered from long-term stagnation in theater attendance. The domestic box office hit a record $11.37 billion in the U.S. and Canada last year, but that was largely driven by an increase in ticket prices rather than attendance gains.

The ongoing contraction of the home video business has driven entertainment giants including Warner Bros. and Universal Pictures to seek ways to release movies on home video much earlier than usual. The studios have been in talks with major theater chains to shorten the traditional wait between a movie’s theatrical release and when it becomes available for home viewing. One idea is to create a service that would charge as much as $50 for a new movie as soon as two weeks after it hits theaters. Studios and theaters would share the home video revenue from the service.

Video-on-demand rentals were a much-needed bright spot for the industry last year. Spending on VOD titles rose 5% to $2.1 billion, after posting a 3% decline in 2015. Electronic movie and TV sales through outlets including iTunes and Amazon also rose about 5% in 2016, but that represents a dramatic slowdown from the year before when online sales surged 18%.

Physical rentals continued to fade out, shrinking 18% to $2.47 billion last year, while sales of packaged goods, including DVDs and Blu-rays, dropped nearly 10% to $5.49 billion.

Overall, counting streaming subscriptions and home video sales, consumer spending on home entertainment reached $18.28 billion in 2016, up 2% from the year before. The top-selling titles included “Star Wars: The Force Awakens,” “Deadpool,” “Zootopia,” “Batman v Superman: Dawn of Justice” and “Finding Dory.”

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