Digital Media

Consumers have spoken. They'd still rather pop a disc into a DVD player than download or watch a video online, according to a new survey.

Sales and rentals of DVDs and Blu-ray discs in the U.S. made up 88 percent of consumer home video spending over the past three months, according to the survey released Tuesday by market researcher NPD Group.

Your average U.S. consumer paid about $25 per month on video purchases and rentals, with 63 percent on DVD purchases, 7 percent on Blu-ray Disc purchases, 18 percent on rentals, 9 percent on video on demand, and only 3 percent on digital downloads.

Despite the continued popularity of DVD and Blu-ray, online viewing has gained a foothold. In the past three months, 9 percent of connected consumers said they watched movies online versus 5 percent last year. Eight percent rented a movie online, a jump of 4 percent since last year, NPD reported.

"Discs are still and by far the dominant way Americans enjoy home video, but there is an increasing appetite for digital options," said Russ Crupnick, entertainment industry analyst for NPD. "The good news is that the consumers engaging with digital video today also tend to be heavy consumers of DVDs and Blu-ray Disc, but it remains to be seen just how long physical discs and digital formats can co-exist."

The information was taken from an update to a recent NPD Group report entitled "Entertainment Trends In America," which measured home video usage for the previous three months. Conducted online, the survey was based on responses from more than 11,000 U.S. consumers.

Sales of Blu-ray players are themselves growing here in the U.S., with prices down and more consumers craving to watch their favorites in high-definition.

The NPD Group just sent out some interesting statistics, based on a study conducted by its music-tracking service.

"In 2008, 87 percent of digital-music buyers in the U.S. used iTunes to download music, versus just 16 percent who used Amazon MP3," according to a spokesman for the research group. (Those surveyed could list more than one store.)

On the face of it, the study's numbers don't sound so bad.

Russ Crupnick, an NPD analyst agreed that they should encourage Amazon. For one, the online retailer's music store is in second place only 18 months after opening. Amazon's digital-music store is also faring better than most of Apple's previous challengers, Crupnick said.

"It used to be that iTunes was first, and second was practically nobody," Crupnick said.

Amazon MP3 has begun to catch on with an audience that is a little older than the average iTunes shopper, and that's good, Crupnick said.

"I suspect a lot of consumers, some of them a little older, are still buying CDs," he said. "That's going to help Amazon because they aren't battling over every crumb with iTunes. They'll share some customers and have some of their own, and that will help the company with growth."

The other major point the research shows is just how strong the iTunes franchise is, according to Crupnick. Apple's music store is home to almost 90 percent of the music buyers.

For people wary of the price changes set to hit iTunes on Tuesday, according to a report in the Los Angeles Times, Crupnick said the NPD Group will be tracking sales very closely, but he's very skeptical that the variable pricing structure Apple is adopting (ranging from 69 cents for catalog songs to $1.29 for newer hit songs) won't harm sales.

UPDATE:To include quotes from NPD Group analyst Russ Crupnick

DVD sales are flat but the drop doesn't have anything to do with movie downloads, according to the NPD Group.

The research group reported Tuesday that, on average, consumers spent 41 percent of the money budgeted for movies and other video content by purchasing DVDs of films. Movie rentals on DVD were the next biggest category with 29 percent. Consumers spent 11 percent purchasing TV shows on DVD. About 18 percent went to theater tickets, according to the report.

Here's the kicker for Internet video: only 0.5 percent was spent on renting or purchasing TV shows or movies off the Web.

This shouldn't surprise anybody. Digital video is still in its infancy. Narrow bandwidth in the United States, compared with much of the industrialized world, makes it time-consuming to download the enormous movie files.

Technology that compresses those files have improved but the quality and viewing experience is still far inferior to watching a DVD. Hollywood still doesn't allow digital downloads the same kind of portability as DVDs. A consumer can buy a movie on iTunes that may not play on a non-Apple device.

Then there is the problem with choice. Most of the services still have only a fraction of the films available as any corner video store.

Stats like those from NPD Group, while they may be accurate, don't tell the whole story. Hollywood believes digital media is the future as evidenced by the deals made with Microsoft's Xbox, iTunes, Roku's Netflix Player, and others. Let's see how much market share downloads account for in the next couple of years.

"Main street continues to line up behind Blockbuster and Best Buy," said Russ Crupnick, NPD's industry analyst. "I think the studios are smart to try different things and learn what they can. Eventually, we're going to see downloads start to get traction. But from a consumer point of view, there's just not any stickiness now."