DVD vs. Online Spending – Who is Buying What?

The home video market for movie studios is rapidly changing.  Consumers are watching content online or subscribing to services like Netflix rather than purchasing DVDs.  IHS Screen Digest predicts that for the first time more movies will be watched online than on DVD in 2012.  That said, people are still buying DVDs.  Who are these consumers, where do they live, and how much do they spend?  Are these the same consumers who are paying for online video or are they different?

Let’s first tackle how much people spend on DVDs.  The average household in the United States spends approximately $50.76 per year on DVDs and video cassettes.  (Going forward we will just refer to DVDs since the VHS market is very small, but the numbers encompass both.)  The zip codes where households spend the most on DVDs live primarily along the eastern seaboard and in some California coastal cities.  The zip codes with the top average household spending on DVDs are:

Zip Code City Average Spent per HH per Year
10007 New York, NY

$146.36

33965 Fort Myers, FL

$145.35

10282 New York, NY

$130.28

22066 Great Falls, VA

$129.60

07078 Short Hills, NJ

$127.46

The online video market is similar to the DVD market in some areas of the country and different than others.  For example, more people in the Midwest spend a higher than average amount on DVDs than on online video.  It’s clear that some people are just simply fanatics about content and will purchase it whatever form is available.  Others prefer one platform over the other.  The top online video markets for spending are:

Zip Code City Average Spent per HH per Year
07078 Short Hills, NJ

$4.70

22066 Great Falls, VA

$4.66

10007 New York, NY

$4.60

10514 Chappaqua, NY

$4.58

60043 Kenilworth, IL

$4.57

Note that 3 of the top 5 zip codes for online video spending are the same as DVD spending. Also, 2 out of 3 of these zip codes have median incomes of over $200,000 (07078 and 22066).

Knowing something about the consumers that spend the most on a product or service can be extremely helpful to marketers, product developers, and distributors.  Esri, a geographic information systems company which also does data analysis, developed a tapestry segmentation that classifies US residential neighborhoods into 65 unique market segments based on socioeconomic and demographic characteristics.  This information combined with consumer spending data can give a very telling picture about consumers.

There are 7 tapestry segments in which at least 75% of the census block groups where the tapestry segment is dominant have an average annual spend of $63.51 or more on DVDs.  This is 1.25 times more than the average US household of $50.76.  The segments with the highest percentage of DVD spenders of $63.51 or more are Top Rung, Suburban Splendor, Connoisseurs, and Boomburbs. Residents of Top Rung neighborhoods are mature, married, highly educated, and wealthy.  Boomburbs residents are a similar segment with busy, affluent, young families.  City Commons residents are very young with an average age of 24.6 years and very ethnically diverse.

The people who are willing to pay for online video are very similar to those willing to pay for DVDs, but there are a few that are different.  The ones that overlap indicate that many of the consumers may be platform agnostic – they just want to consume video wherever they area.  The top segments are for online video spending are Top Rung, Connoisseurs, Suburban Splendor, and Wealthy Seaboard Suburbs – which are all in the top 7 for DVD spenders where 75% or more of the census block groups where the segment is dominant spend $63.96 or more per year. In each of these, over 99.8% of the census block groups dominated by those segments have an average of at least $1.70 spent on online video per household per year – and many have much more.   The amount $1.70 is 1.25 times the amount the average American household is spends of $1.36 per year.

There are a few segments with very different purchasing patterns.  For example 92% block groups with City Lights as the dominant tapestry segment have an index of 125 or greater for spending at least $1.70 for online video.   Only 8% of block groups where City Lights is dominant spend at least $63.51(representing an index of 125) on DVDs each year.  This segment is above average in online video spending but below average in DVD spending.  Residents of City Lights are composed of diverse neighborhoods primarily in the Northeast.   The median age is 38.3 and a median household income of $60,149.

It should be noted that DVD spending is still significantly greater than online video spending, so this analysis focusing on the norm for each distribution mechanism, but displays where opportunity is in the immediate future for content distributors.

More information about Esri’s tapestry segmentation can be found at http://www.esri.com/tapestry or to learn more about Esri in general, go to www.esri.com.