In the third quarter of 2013, physical media rental revenues totaled $966 million, compared with $815 million in streaming subscription revenues. Physical media rental revenue declined 18% to $793 million in the third quarter of this year, while subscription streaming revenue totaled $1.03 billion, up 26% year-over-year.
Combined with a 9.5% decline in video-on-demand rentals, rental revenues overall fell 15% to $1.22 billion. Streaming and disc subscription services posted revenues of $1.23 billion. As the situation stands, digital revenues should pass physical sales sometime in 2016, according to nScreen Media.
Sales of physical media totaled $1.33 billion in the third quarter of 2014, down 8% year-over-year. Year to date sales, of physical media are also down 8% to about $4.6 billion. Including digital downloads (called electronic sell-through, or EST, in the industry), total sales fell 2.5% to $1.68 billion. The data was reported on Wednesday by the Digital Entertainment Group.
The direction that video entertainment is headed favors companies like Netflix Inc. (NASDAQ: NFLX) that offer both physical and digital streaming. Amazon.com Inc.’s (NASDAQ: AMZN) Prime Instant Video and Hulu Plus are other examples of where consumers are taking the market.
Outerwall Inc. (NASDAQ: OUTR) and its Redbox kiosks are not in a solid position going forward, although the company did post good earnings last week. The company’s streaming joint venture with Verizon Communications Inc. (NYSE: VZ) was cancelled last month.
Another long-term loser appears to be the video-on-demand services offered by cable operators like Comcast Corp. (NASDAQ: CMCSA) on a pay-per-view basis.