Consumption of online movies passes physical movies for the first time

If physical DVDs and Blu-Ray discs aren't dead, they're certainly in the process of shuffling off this mortal coil. According to Broadband TV News, IHS Screen Digest forecasts that legal, paid consumption of movies online  in the U.S. will reach 3.4 billion views in 2012 from 1.4 billion last year, while views from physical media (Blu-Ray and DVD) will decline to 2.4 billion from 2.6 billion last year. Online views will grow 135% year-over-year.

IHS forecasts that 2012 will be the crossover point, when online viewing of movies (including video-on-demand) will first exceed rental and purchase of physical media for watching movies. 2.4 billion views on physical media is nothing to sneeze at, of course, and it'll be years before DVDs and Blu-Ray discs become insignificant. Nevertheless, the handwriting is clearly on the wall: Consumers are getting comfortable with renting and watching movies online.

There are three reasons why online viewing won't grow even faster:

• Redbox's $1.20/day rental fee and huge installed base of kiosks makes its service both cheap and convenient for consumers, 
• Renting and buying physical media enables consumers to use the millions of DVD and Blu-Ray players they already own, and
• Movie studios are still holding back most of their recent releases from Netflix and other services.

New devices, such as Roku's "streaming stick", will make adding streaming Internet video to millions of HDTVs even easier than it is today. It's entirely likely that physical media will be obsolete before the end of this decade, especially if movie studios make more of their releases available for early streaming.