By 2011, the online video market will have a retail value of $3.8 billion worldwide, according to a new industry report from Understanding & Solutions.
The entertainment analyst firm said that despite a raft of activity within the sector – ranging from new service launches, key content partnerships and continued experimentation with business models – online video has, to date, taken off much slower than the industry anticipated.
The US leads the way, yet is only expected to generate revenues of $280 million in 2007, 1% of the total home video market.
Mai Hoang, analyst at Understanding & Solutions, said: “The market is currently underperforming for a variety of reasons.
“Online video services and title availability are limited, pricing strategies are embryonic and the technology infrastructure has yet to catch up. However, momentum is building and by 2011 online video in the US will represent 8% of total home entertainment revenues, with Western Europe close behind at 7%.”
“What’s more, multiple formats will coexist in the future, and no one format will control the home entertainment landscape, quite unlike the domination of DVD since the demise of VHS,” added Hoang.
“The new generation of High Definition video formats will also help to shore up packaged media’s presence within home entertainment revenue streams.”
At present the US online video market is predominantly driven by two services, Apple iTunes – using the Electronic Sell-Through (EST) model – and Xbox Live Video Marketplace – using online VoD. iTunes has sold in excess of 2 million movies and 95 million TV shows to date.
Going forward, online video must continue to reach out to the living room to ensure mass market penetration, said Understanding & Solutions.
The rise of home networking will be a major driver in developing its presence, and media extender solutions such as Apple TV are already available to consumers.
In November, Nielsen Online revealed that almost 21 million Britons visited a TV, video or movie-related website in Sept 07, a year on year increase of 28% (see 21 Million Britons Visit Video Websites In September).
Continental Research’s Autumn 2007 Internet & Convergence Report found that the number of people watching internet TV has increased steadily year on year, suggesting a healthy future for this technology.
In particular, the number of people watching shows they have previously downloaded from the internet has doubled, from 1.3 million in 2006 to 2.4 million in 2007 (see Internet TV Growing Strongly).
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