iTunes grows its (tiny) share of online digital movies


Philip Elmer-DeWitt is a senior editor at Fortune.

Apple looks like a pretty big fish in the video on demand business -- if you ignore Netflix

If all you saw was the pie chart at right, produced from data issued Monday by iSuppli, you might think that Apple (aapl) had succeeded in doing to digital video what it did to digital music.

According to iSuppli, now a unit of IHS (ihs), iTunes' share of U.S. consumer spending for movie electronic sell-through (EST) and Internet video on demand (iVOD) grew 1.4 percentage points year over year to 65.8% in the first half of 2011. That, according to iSuppli, is a reversal of a several-year trend in which Apple was losing ground to upstarts like Amazon (amzn), Microsoft's (msft) Zune, Sony (sne) Playstation and Vudu, now part of Wal-Mart (wmt).

But the fact is that all these services live in the shadow of Netflix (nflx), which according to an NPD study last March is the real giant of online video on demand with a 61% share compared with Apple's 4%, DirectTV's (dtv) 4% and Time Warner Cable's (twc) 4%.

The difference is that Netflix delivers the bulk of its content to televisions, which is where most Americans watch their video, as opposed to computers, tablets or game machines.

And even Netflix's business pales compared with DVD sales, according to a report issued two weeks ago by NPD.

“[Pundits have] proclaimed the end of physical media and the supremacy of the digital age,” wrote NPD's Russ Crupnick in a Aug. 8 blog post. “That age will come eventually, but today many more people buy DVDs than watch Netflix streaming.”

Below: iSuppli's spreadsheet.

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