March 15, 2011, 1:42 PM

Netflix dominates digital video retailing

Apple’s iTunes trails with a 4% market share, according to the NPD Group.

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While major online players Amazon.com Inc., Apple Inc., Sears Holdings Corp. and even Facebook Inc. are part of the digital video landscape, there is only one dominant retailer in the space—Netflix Inc., according to a report from the NPD Group.

The market research firm says that Netflix claimed 61% of the digital video market, which is composed of both downloads and streaming, in the first two months of this year; that figure is based on consumer views of video content. Its next closest competitor, Comcast Corp., had 8% of the market.

There was a three-way tie for third place, with Apple’s iTunes, Time Warner Cable and DirectTV each having 4% of the market.

That’s in line with Netflix’s evolution from a company that mailed consumers DVDs of movies and TV shows to video streaming. Since introducing a streaming-only subscription plan last November more than one-third—over 2.5 million—of the retailer’s 7.7 million new subscribers signed up for the pure streaming plan, which means they do not receive discs in the mail, the company said in January.

Those results led Goldman Sachs to suggest that Netflix would end its DVD distribution by 2020. “Going forward, we anticipate that management will be most focused on acquiring digital content rights, and that digital will represent 80%-90% of additions over the next few years,” says the Goldman Sachs report.  

Netflix also wants to expand its digital reach. The retailer is building an integration with Facebook, wrote Reed Hastings, the company’s CEO, in a January letter to investors.“We’re working on an extensive Facebook integration, which will further the notion of a personal Netflix account,” he wrote. “This evolution from household to personal relationship will take several years, and there will always be some households that only have one account.” He did not provide further details.

NPD’s research is based on online surveys of 10,618 consumers conducted in January and February.

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