The research firm predicts that consumers in the UK will spend £1.3 billion on streaming and downloading in 2016 compared to £956 million on DVDs and Blu-rays.
The figures mark a 23.7% year-on-year increase in digital spend and a 16.3% decline in physical media spend, with DVD sales tipped to drop below £1 billion (US$1.5 billion) for the first time since 1994.
“Five years ago, DVDs represented 86% of consumer spend on home video, in five years it will be less than 14%, with DVD/Blu-ray rental virtually extinct,” said Strategy Analytics’ digital media director, Michael Goodman.
“As online provides increasing ways to access films and box-sets, physical simply can’t compete. Although many people will always prefer a physical disc, retailers will have to decide whether it’s even viable to offer that format in five years’ time.”
According to the research, streaming subscription service, such as Netflix and Amazon Prime Video are the fastest-growing format with spend on these services to rise 36% to £742 million this year.
Strategy Analytics estimates there are around 4.6 million Netflix and 2.5 million Amazon Prime households in the UK, and claims that around 20% of SVOD households subscribe to at least two services.
“Video streaming subscriptions will be the dominant format from 2017 onwards and will account for over half of consumer home video spend by the end of 2021,” said the report.
Overall, online formats will account for 58% of home video spend this year, compared to 42% for DVDs. The £2.3 billion Britons will spend on home video is a 3% rise on 2015 and the equivalent of £6.63 per household a month.