I’ve written about the Blu-ray vs. streaming media ‘battle’ in this space on so many occasions that it seems impossible to find anything fresh and new about the topic to bring to your attention. But a recent press release from the Digital Entertainment Group - the biggest cheerleaders for the Blu-ray format - shows there’s still plenty of wheat to be harvested from this field.

For the first half of 2010, DEG’s research shows that consumer spending on digital distribution platforms for home entertainment (including everything from Netflix streaming to cable video-on-demand) outpaced Blu-ray disc sales and rentals, passing the $1 billion mark for the first time.

Wow… one billion dollars. (For more impact, say it slowly like Doctor Evil does, with his pinky up to his lips and his eyebrows arched.) If that isn’t clear evidence that consumers are embracing digital delivery and backing away from optical discs, I don’t know what is.

More details from the DEG release, as reported by Media and Entertainment Daily: "…Electronic sell-through increased up 37% year-over-year to $285 million between January and June, as video-on-demand (VOD) rose 19% to $865 million, for a combined growth of 23% to $1.1 billion." Impressive!

But Blu-ray is still hanging in there. Quoting from the MED story, "Sales and rentals of Blu-ray discs reached a combined total of $982 million for the six-month period, with Blu-ray sell-through increasing 84% year-over-year to $733 million…Blu-ray disc shipments topped 77 million units in the first half of 2010, nearly double the…comparable period in 2009."

Now, for the bad news: Overall consumer spending for the first half of 2010 for pre-recorded entertainment, including red and blue laser DVDs, plus digital distribution, totaled $8.8 billion, off 3% compared to the same period in 2009. More significantly, packaged media sell-through declined 7% year-over-year during the January - June 2010 period, continuing a trend that started back in 2006. (When was the last time you bought a movie on DVD or Blu-ray?)

DEG’s report went on to say that, while DVD and BD rental spending was down nearly 5% between January and June, kiosk DVD revenues (Redbox, etc.) increased 55% at the same time. (DEG attributed the decline in rentals to the closing of numerous Movie Gallery video stores.)

The explosive growth in kiosk DVD income is no surprise, as $1-per-night movie rentals right at the checkout counter are irresistible, and cost less than a twelve-ounce coffee. Just today, I spotted a shiny-new Blockbuster Express DVD rental kiosk at my neighborhood Genuardi’s supermarket - right past the cashier, and before the exit doors.

One last quote from the DEG report is worth noting: "Household penetration of all Blu-ray compatible devices, including set-top players, PC drives and PlayStation 3 consoles, has now reached 19.4 million U.S. homes." Caveat: While that’s an impressive number, it doesn’t necessarily mean all of those homes are renting and buying Blu-ray discs on a regular basis - or even at all.

Recall that all LG and Samsung BD players include Netflix streaming capability, along with PlayStation 3 consoles and at least one Sony BD player. Given the rapid growth in downloads and streaming (as evidenced in the lead of this story), it’s reasonable to assume that a few of those BD players are primarily used for Netflix connections.

Speaking of which - Netflix has just announced they will open a Canadian operation, consistent with the company’s stated goal early this year of going international. ‘Big Red’ will begin streaming movies this fall, but will stay out of the DVD-by-mail business altogether north of the 40th parallel. The fact that postage is so expensive in Canada probably had a lot to do with the decision.

Let’s recap: Blu-ray rental and sales for Q1 and Q2 are up 84% over 2009, but downloads and streaming are up even more, 37% over 2009 and topping $1B. Overall, DVD and BD sell-through declined 7% for the first six months of this year when compared to 2009, which would indicate that the impact of BD sales and rentals is still pretty small, and not enough to stem the advancing tide of digital delivery.

In 2009, kiosk revenue approached $1B (there’s that magic number again!) and helped offset a 3% Y-Y decline in brick-and-mortar store movie rentals. So it’s evident that DVD rental kiosks are saving the chestnuts of optical media, which is why all of the studio lawyers should stop making life difficult for Redbox and concentrate their efforts instead on getting more movies into those vending machines on a timely basis, especially new Blu-ray titles.

Unfortunately, $1 kiosk rentals are another reason why purchases of DVDs and Blu-ray discs continue to decline - it’s a no-win situation. If there’s any good news in here for optical disc advocates, it’s that DVD/BD sell-through is only down 7% over last year at this point in time - by the end of 2009, sell-through had declined a whopping 12.2% over 2008, according to Rentrak.

Anyway you look at it, consumers are definitely buying convenience over quality when it comes to watching movies. Streaming is growing by leaps and bounds, even though it offers only near-DVD quality at best. And DVD rentals are only holding their own through kiosks.

As broadband connection speeds increase and more efficient video/audio compression is realized, the rapidly rising tide of digital delivery could become a tidal wave, sweeping away what’s left of the optical media sell-through and rental business as it washes back out to sea.

If nothing else, this tale could make for a compelling Hollywood summer blockbuster: "Swept Away!" (Whoops - I forgot that Lina Wertmuller already used that title three and a half decades ago…)