In a recent online media report from IHS, we found that Netflix, Inc. (NASDAQ:NFLX) trumped Apple Inc. (NASDAQ:AAPL) last year as the top online movie provider.
Netflix, Inc. (NASDAQ:NFLX) is one of the most important websites in it’s market niche and the numbers don’t lie: their market share grew 44 percent in 2011 and that’s just less than one percent from the previous year. The same survey results found indicated less than stellar results for Apple’s iTunes which dropped significantly from 2010’s 60.8 percent to 32.3 percent in 2011.
Digital media research director at IHS Dan Cyan thinks this trend will continue to change of the next few years as online video becomes more commonplace, “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 more TV-like subscription approach. The online movie business more than doubled in 2011 to reach $992 million and it is expected to double this year as well.”
Cyan later states that Apple doesn’t really have to worry about Netflix, Inc. (NASDAQ:NFLX) as a top competitor because the overall businesses are different. And he’s certainly got a point. While both companies are essentially in the business of providing boundless entertainment options, Netflix’s primary business is streaming movies while Apple dominates many industries including smartphones and tablet computers. iTunes is just one of their sub-brands but they offer more than just streamable movies and tv shows.
The report also shows that overall spending for physical video has decreased and so has digital rentals. These decreases may be the key to Netflix’s growth. Most people would rather spend one monthly fee for unlimited movies (and television shows) they could stream online than pay three or four dollars for a movie they can only watch within a twenty-four time frame. I think that if more companies followed Netflix’s successful business structure, they could be even more successful.