Netflix Surges Past Apple, Takes Lead in Online Movie Biz

Netflix surpassed Apple last year to become the largest U.S. online movie streaming service in terms of revenue, says market research firm IHS.

Netflix's share of U.S. online movie revenue rose dramatically to 44 percent in 2011, up from less than 1 percent in 2010, according to a new IHS Screen Digest Broadband Media Market Insight report. Two factors contributed to this surge: Netflix's decision to separate its online-streaming and DVD-by-mail business; and a big increase in the number of people streaming video to their TVs and mobile devices.

While Apple's online movie business has shown strong revenue growth in recent years, its share of the total market declined to 32.3 percent last year from 60.8 percent in 2010, IHS says.

"2011 marked a sea change in the online movies business that saw the balance of consumer spending shift from a DVD-like transactional model to a more TV-like subscription approach," said Dan Cryan, research director for digital media at HIS, in a statement.

Apple and Netflix compete for your entertainment dollar, but each has a different approach to online viewing. Netflix offers tens of thousands of movies and TV show episodes, mostly older titles, for a set monthly fee. Apple's iTunes, on the other hand, charges a separate fee for individual movies and shows.

Netflix dominates the subscription streaming market, IHS says. Second-place Hulu is less than 10 percent of Netflix's size.

"Rental delivers unlimited consumption with a low monthly fee for older titles as well as cheap rentals of new releases, providing the kind of value that online consumers want," said Cryan.

Contact Jeff Bertolucci at Today@PCWorld, Twitter (@jbertolucci) or

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