Dive Brief:

• The Digital Entertainment Group revealed that streaming video revenue surpassed video disc sales for the first time in 2016, as reported by Variety.
• Streaming video from providers such as Netflix reached $6.2 billion last year while video disc sales trailed at $5.4 billion. The trendline isn’t encouraging for discs as sales dropped almost 10% while streaming service subscriptions increased almost 23%.
• The report also pointed out that disc sales provide studios with high margins and had traditionally been the biggest revenue stream for U.S. home entertainment spending, but those sales are a “rapidly declining contributor to studios’ bottom lines.”

Dive Insight:

With digital ad spending having surpassed linear TV for the first time and ongoing growth expected, this research is just another example of how much viewing is happening online, a trend marketers need to be paying attention to.  

For studios, the news reflects the need to figure out how to better monetize digital content. The underlying shift in content consumption might be even worse than the research indicates as the DEG report didn’t take into account Amazon Prime revenue which is considered the second largest revenue contributor to video streaming subscriptions.

One way studios may respond is by looking for key partnerships in the digital space. For example, AT&T's proposed merger with Time Warner would look to become the first U.S. mobile service to compete nationwide with cable companies to provide bundled mobile broadband and video. 

The report also pointed out that total U.S. home entertainment spending was up 1.36% over 2015 at $18.3 billion, but when subscription streaming is taken out of the total it turns into a 6% decrease over 2015.