Netflix dethrones Apple as top U.S. movie service

Netflix has dethroned Apple as the largest online movie service in the U.S. for 2011, according to a new report from IHS iSuppli.

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The data intelligence firm’s conclusion is based on Netflix’s total revenue last year, and indicates that the company’s overall market share in online movie services grew by 44 percent compared to the previous year. Mind you, that growth comes despite Netflix’s various screw-ups, such as its plan to spin-off the DVD-by-mail part of its business into a separate entity, a 60 percent price hike, and generally ignoring its customers. (It’s worth noting that Netflix seems to have weathered most of those storms judging by its current subscriber numbers.)

Meanwhile, IHS’ data shows that Apple’s 2011 iTunes market share of online movies was cut in half and dropped to 32.3 percent compared to last year. These figures undoubtedly played a role in Apple’s decision to start letting Apple TV owners sign up/subscribe to Netflix using their iTunes account back in March. While nothing has been publicly disclosed, its presumed that Apple is getting a percentage of every Netflix customer that pays through iTunes — a move that’s probably proving more profitable than Apple’s video rental and purchase sales.

In the report, IHS Digital Media Research Director Dan Cryan notes that the online movie business is also rapidly changing. Consumer spending more than doubled to $992 million in 2011 compared to the previous year, while traditional retail store movie sales dropped 12 percent to $8.8 million. Cryan also points out that there is a limit to how much you can even compare Netflix to Apple.

“Effectively the market has split,” Cryan said. “Netflix and Apple are competing for some of the same consumer time and money. However, the core value proposition of the two services is actually very different.”