Thank Netflix: Home entertainment biz is growing again

Will the moribund home entertainment sector actually finish 2012 up over 2011?

Year-over-year growth in Hollywood’s “homevid” business hasn’t happened since George W. Bush was midway through his second term, with the market following the inexorable decline of DVD. But on Sunday, studio-backed research firm the Digital Entertainment Group released data showing that the U.S. home entertainment industry is up 1.4 percent through the first six months of the year.

The digital side of the business generated $2.4 billion during this period, according to the DEG, a 78 percent uptick. Leading the way has been subscription video on demand, which the group says has spiked in revenue by 430 percent for the first six months to $1.1 billion.

Also read: Forecast – Online demand for movies, TV shows will top DVD sales this year

With Netflix (s NFLX) reporting $1.04 billion in U.S. streaming revenue during the first two quarters, it’s easy to tie this metric to Los Gatos, Calif. Yes, it’s all true you — the company with the cratering stock price has turned the home entertainment business around.

Other research groups, including IHS Screen Digest, have suggested that the SVOD market will never replace DVD sales as a profitability driver, given the vast difference between margins. At least in the short term, however, SVOD is generating real revenue.

Revenue from electronic sell-through (i.e. downloads on iTunes and Amazon) in the U.S., the DEG also notes, was up 22 percent to $329.4 million.

The overall disc business keeps declining, with sales of physical video media dropping 3.6 percent to $3.7 billion during the six-month period and disc rentals declining 26 percent to $2.3 billion.

However, the kiosk rental business, led by Redbox, is still expanding nicely — it was up 23% to $990 million, according to DEG.

Also read: Kiosks keeps rolling: Redbox reports 26% revenue increase

Cheerleading a bit for the studios’ pet initiatives, the DEG also says that U.S. consumer spending on Blu-ray was up over 13 percent (but it didn’t release a revenue figure).

Also read: UltraViolet creeps along – now up to 3M users

DEG also claims that the major studios’ cloud initiative, UltraViolet, has now signed up 4 million users. While still underwhelming, that represents an acceleration of growth, with the Wal Mart-backed UltraViolet group reporting 3 million users as recently as early June.