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Is Streaming Video Cannibalizing Amazon's DVD Sales?

DVD library

Over Memorial Day weekend, blockbuster sequels such as The Hangover Part II, Kung Fu Panda 2, and Pirates of the Caribbean: On Stranger Tides soared at the box office. Unsurprisingly, prequels to these films also earned a boost in sales at the home box office, thanks to consumers looking to "quickly catch up on missed movies," according to an Amazon spokesperson, who added that all three of the franchises showed up on Amazon.com's top 30 best-sellers list for Instant Video.

Yet there was one top 30 list where the titles were noticeably absent: the best-sellers for movies and TV on DVD and Blu-ray, where, as the spokesperson explained, "[the trend] is not carrying over" from Instant Video. In other words, as consumers become more and more comfortable with streaming content online, less and less are they opting to purchase physical copies of the same content. Are Amazon's streaming offerings cannibalizing its DVD and Blu-ray sales?

Amazon offers a wide range of content delivery options. With Instant Video, consumers have access to iTunes-style VOD streaming rentals and purchases, where content is available for roughly between $1.99 and $14.99, respectively. Then there's Amazon Prime Instant Video, the retailer's Netflix competitor, which gives users with a Prime membership ($79 annually) access to an all-you-can-eat buffet of films and television shows. Lastly, Amazon still sells content on traditional platforms like DVDs and Blu-ray.

Why is this an issue? Take the Pirates of the Caribbean franchise. The Curse of the Black Pearl is going for $17.79 on DVD. On Amazon Instant? Just $1.99. Dead Man's Chest? On DVD, $18.99; on Instant, again, $1.99. And At World's End? Yes, $1.99 on Instant. On DVD? About $28. That's a huge chunk of change Amazon is losing out on as its streaming business grows in popularity.

Pirates of Caribbean on Amazon

Of course, that's where the market is headed—Amazon can't be expected to rely on sales from an increasingly outmoded platform like DVDs, especially as Netflix and a slew of other competitors are rapidly ramping up their VOD and subscription streaming services. "Consumers want both," says Amazon spokesperson Cat Griffin, referring to those who enjoy the "instant gratification" of streaming and those who still like owning discs. "We're still seeing a lot of interest in physical DVDs."

But will DVD sales decline as Instant video becomes more popular on Amazon?

"I wouldn't speculate on what I think sales will be in the future, but I can tell you what we're seeing right now, which is that both formats—Instant and physical—are doing well," Griffin says. "Customers are still very interested in both."

Undoubtedly, DVD sales are down (about 11% in 2010), but still represent a $14 billion market. VOD, on the other hand, brought in $1.8 billion last year, up more than 20%.

[Image: Flickr user Screenpunk]

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