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Apple retains dominance in movie VOD market

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Though we talk a lot about Hulu and Netflix, the real winner in online video distribution may be Apple. Despite heated competition from competitors like Microsoft and Wal-Mart, the iTunes store retained a dominant share of digital movie purchases in 2010, according to IHS Screen Digest. iTunes accounted for 64.5 percent of the Electronic Sell Through and Internet Video on Demand (EST, iVOD) market during 2010, down from 74.4 percent in 2009. Apple’s continued leadership in the market is impressive considering the 60 percent growth the EST/iVOD went through in the last year.

Apple’s biggest threat: Microsoft. Thanks to the success of the Xbox 360 Kinect, Microsoft saw its share of the video market increase dramatically in the last quarter of 2010, with movie downloads on its Zune service rising substantially in the period. Other competitors like Sony, Amazon, and Wal-Mart–which owns Vudu–also made efforts to capture market share.

“The iTunes online store showed remarkable competitive resilience last year in the U.S. EST/iVOD movie business, staving off a growing field of tough challengers while keeping pace with an dramatic expansion for the overall market,” said Arash Amel, research director, digital media, for IHS. “Apple faced serious competition from Microsoft’s Zune Video and Sony Corp.’s PlayStation Store, as well as from Amazon and—most significantly—Wal-Mart. However, iTunes managed to grow because of the introductions of the iPad and the second-generation Apple TV, which have spurred the company’s movie rental offerings and have invigorated the iTunes multi-screen ecosystem. We expect that in the United States, Apple’s strong performance in iVOD will allow it to continue to bypass the video on demand services offered by many major cable operators.”

The big question is, who has it right? Will subscription streaming services like Hulu and Netflix win or will consumers move toward rental and purchase video on demand services like Vudu and Apple TV?