Netflix Watch Instantly

Americans are going to watch a lot more movies at home this year, but the entertainment industry won't be making nearly as much money from it.

According to a new report from IHS Screen Digest, the number of films bought or rented online this year will grow by 135 percent in 2012 to 2.4 billion.  While this sounds great at first glance for film studios, consumers will only spend $1.72 billion to do so compared to the $11.1 billion they spent last year on DVDs and Blu-Rays.  This will break down as 57 percent of consumer movie consumption will be done online, but at only 12 percent of the spending.

IHS analyst Dan Cryan said of the move to steaming media, "The result would be a net decline in home entertainment revenue even as consumption reaches previously unattainable heights."

The source of the biggest hit to the revenue is the all-you-care-to-watch programs like Netflix Watch Instantly, Hulu Plus and Amazon Prime Instant Videos.  Last year those three services made up 94 percent of online movie watching, but digital purchases made up a paltry 1.3 percent.

This of course doesn't mean that physical media for films is going to disappear oever night.  "We are looking at the beginning of the end of the age of movies on physical media like DVD and Blu-ray," Cryan said.  "But the transition is likely to take time: almost nine years after the launch of the iTunes Store, CDs are still a vital part of the music business." However, at the same time, Cryan said in the report, "The year 2012 will be the final nail to the coffin on the old idea that consumers won't accept premium content distribution over the Internet."

The movie studios are trying their best to deal with this new elephant in the room, and while the larger studios are doing their best to force you into purchasing the physical copies, smaller studios have been flocking to get their films out there.  While DVDs and Blu-rays won't disappear over night, it does seem that movie studios are doing to have to quickly learn how to deal with this new paradigm.  Lets just hope they study it thoughtfully before jumping to silly solutions.

[via Los Angeles Times]