Apple iTunes holds top spot on VOD sales chart, Amazon drops

Transactional video on-demand continues to be an attractive option for home entertainment buffs according to new research by IHS iSuppli. Surprising no one, Apple maintained its virtual stranglehold of online movie sales with iTunes. However, that’s not to say there were no major shake-ups to the leaderboard. Sony’s PlayStation Store swapped spots with the up-and-comer Vudu while Amazon struggled.

Market leader Apple saw just a slight increase in revenue for the first half of 2011, but based on IHS Screen Digest research even that could be considered overkill. The popular company garnered almost 66 percent of the transactional VOD market over last year’s 65 percent. Arash Amel, digital media research director at IHS, dubbed Apple’s feat “a remarkable achievement in light of intensifying competition.” The analyst attributed its continued market leadership to a deliberate effort to expand service to more people.

“Much of iTunes’ success can be traced to the rising usage of Apple’s AirPlay system, which allows wireless video streaming to consumer electronic devices including television,” said Amel. “This has expanded the reach of iTunes to new platforms, boosting sales of movies from the system.”

While Apple is making a killing off electronic sell-through movies, other companies are making inroads. Vudu, the online movie renter/seller snatched up by Wal-Mart early last year, breezed past Amazon to grab the number three spot. A huge deal, says IHS – and one the group predicted.

“Vudu has emerged as a major market rival to established players like Apple and Sony,” said Amel. “Vudu’s gains were driven by several factors, including its shrewd device strategy, a good customer experience, a compelling user interface and its $1/$2 rental pricing system.”

Indeed, Vudu has also usurped Sony’s PlayStation Store. The online PlayStation 3 marketplace was inaccessible for weeks following a massive cyber attack on its servers that compromised the personal information of millions of customers. The downtime played a considerable part in the decline, though isn’t solely to blame. “The PlayStation Store fell out of the Top 3 rankings chiefly because Vudu cannibalized its market share,” explained Amel, who also noted the “deleterious impact” of millions of gamers unable to use the PS Store on the company’s bottom line.

Microsoft, Sony’s chief rival in the video game console space, also saw an overall drop in its Zune Marketplace share. It still holds the venerable second place spot with around 16 percent, but that’s down 2 percent from 2010. IHS speculates that the end of the Kinect honeymoon hurt the company’s online video business.

Amel ultimately threw his weight behind transactional VOD and played down electronic sales even as IHS predicts the latter will outperform the former in 2011.

“The new-release on-demand business is all about iVOD,” Amel said. “In the current economic climate, consumers are more interested in accessing movies than in owning them. Because of this, growth in EST has virtually stopped. Whatever small EST growth that is happening is coming from aggressive sales on iTunes, as well as discounting across major services.”