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Things got even more challenging for the studio system in the 1970s, when the introduction of cable television and the videocassette gave rise to the home-entertainment movement. Despite advances in movie exhibition, many people prefer the convenience of watching movies at home. Though home theater looked like the final blow to the studio system at the time, Hollywood managed to adapt, and developed a new market for renting and selling movies, first on VHS, and then DVD. Currently, almost 50 percent of domestic revenue for Hollywood studios comes from the video/DVD rental and sales markets, leaving box-office receipts accounting for just 20 percent of total film revenue.

Today, as many audiences augment their high-definition television sets with surround sound audio systems, home movie exhibition is again in transition, now incorporating Internet delivery. As DVD sales began to decline, Hollywood endorsed the high-definition format Blu-ray in 2008 to revive sales, but the format hasn’t grown quickly enough to help the flagging video store business. Meanwhile, online rental company Netflix became a success delivering DVDs by mail to millions of subscribers; however, Netflix predicts that the future of its business is in video streaming. Initially, its customers could watch part of the Netflix movie collection by streaming it via the Internet for free. But as streaming became more common among its users, Netflix decided to charge extra for that service. Currently, Netflix customers can subscribe to a streaming-only service, the traditional mail-only option, or a combination of the two. Movie fans can also download and stream videos through Xbox and Apple TV devices, or watch a selection of streaming movies through services like Amazon Instant or Hulu Plus, available via a traditional computer or through devices like the Roku.