Packaged-media sales and rentals accounted for 84% of more than $4.0 billion (¥477 billion) in consumer spending on home entertainment in Japan in 2014, according to new data from Futuresource Consulting.

Digital video, which includes transactional VOD, electronic sell-through and subscription streaming, has struggled to take hold in Japan, but generated 31% growth in 2014 to reach $670 million (¥81 billion). After the United States, Japan is the No. 2 home video market, followed by the United Kingdom.

Indeed, disc rentals accounted for more than $1.9 billion (¥238.5 billion), or 50% of consumer spending in 2014. Despite small declines, the sector is expected to remain significant, reaching $2.2 billion (¥259 billion) and representing 44% of spending by 2018.



While DVD is declining, Blu-ray Disc offset the decline last year by strong sales of anime, music titles, and Walt Disney Studios Home Entertainment’s Frozen. Japan has the second-largest Blu-ray market in the world after the U.S., and Blu-ray accounted for 45% ($585 million) of $1.3 billion sell-through spending in 2014.

While disc continues to account for the lion's share of home entertainment revenue, broadband penetration, strong uptake of connected devices and a willingness to pay for premium entertainment are galvanizing consumer interest in digital services, according to Joanna Wright, senior market analyst with Futuresource.

Japan ended 2014 with a smartphone install base of 82 million units, or 65% market penetration.

“Mobile operators play a significant role in the online video market with many launching their own subscription video services and prompting the SVOD-via-mobile market to skyrocket from one million users in 2011 to nearly nine million in 2014,” Wright wrote in a Feb. 2 note.

Futuresource said overall home video spending, including pay-TV, should remain relatively stable going forward, totaling $11 billion (¥1.3 trillion) by 2018.