Apple Maintains Movie Dominance, Loses Share [Update]

Apple maintained a dominant position in the market for online movie sales and rentals during 2010, but the company lost some market share in the fast growing market. According to a report released Monday by research firm iSuppli, Apple maintained 64.5% market share in the industry (down from 74.4%), even though the industry as a whole grew 60%.

U.S. Movie Electronic Sell Through and Internet Video on Demand
Movie Market Share Ranking in 2009 and 2010
(Ranking by Percentage of Total Consumer Spending)

Source: iSuppli

Source: iSuppli

While Apple is technically competing in the movie electronic sell through (EST) and Internet video on demand (iVoD) businesses, a market that grew 60% in 2010, iSuppli said that Apple’s iTunes and Apple TV business will be able to bypass the wider market penetration of U.S. cable operators.

In addition, we should note that iSuppli do not include services such as Netflix and Hulu in the EST/iVoD space, categorizing them as subscription streaming services, and not VoD players.

“The iTunes online store showed remarkable competitive resilience last year in the U.S. EST/iVioD movie business, staving off a growing field of tough challengers while keeping pace with an dramatic expansion for the overall market,” Arash Amel, research director, digital media, for IHS (a part of iSuppli) said.

The firm said that Apple is facing increased competition from Microsoft’s Zune Video, Sony Corp.’s PlayStation Store, Amazon, and — “most significantly” — Wal-Mart.

“However,” the company write, “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.”

Going forward, iSuppli noted that Microsoft’s hugely successful Kinect allowed that company to maintain its #2 spot in move downloads, with a large increase in December quarter movie revenue for the company.

Be that as it may, iSuppli said that it’s Wal-Mart that is the most likely company to eventually challenge Apple. Wal-Mart has launched an online service called Vudu, which resulted in a uptick for the retailing giant in online movie sales during the December quarter, which was successful for all three companies.

“The future of the online movie business may come down to competitive battle between Apple and Wal-Mart,” Mr. Amel said. “Although Wal-Mart is not on the charts yet, the company soon will become a major player if its current momentum continues.”

[Update: This article was updated with information on how Netflix and Hulu figure into iSuppli’s report. - Editor]