Paid Video Faces Extinction

    May 14, 2007

The paid video download market will not survive long term and will reach a peak in 2007, according to a new report by Forrester Research.

Paid Video Faces Extinction
Paid Video Faces Extinction
Paid Video Faces Extinction

Forrester estimates that paid video downloads will generate $279 million in revenue this year, up from $98 million last year but they say that advertising models will fuel the online video markets.

They point out that companies such as Amazon, Apple, Microsoft and Wal-Mart offer consumers television programs and movies they can own or rent but that only nine percent of online adults have ever paid to download a movie or a TV show.

"The paid video download market in its current evolutionary state will soon become extinct, despite the fast growth and the millions being spent today," said Forrester Research Principal Analyst James McQuivey.

"Television and cable networks will shift the bulk of paid downloading to ad-supported streams where they have control of ads and effective audience measurement. The movie studios, whose content only makes up a fraction of today’s paid downloads, will put their weight behind subscription models that imitate premium cable channel services."

Forrester predicts that the streaming of ad-supported TV shows will outpace DVR use by the end of 2008. That is welcome news to advertisers as it will prevent ad-skipping and consumers will embrace ad-supported streaming as its less expensive than a DVR and is more flexible.

Paid video download companies such as CinemaNow and Movielink will adjust their business model and partner with satellite and telco service providers to offer video-on-demand (VOD) content without a large investment in VOD infrastructure.

"To attract mainstream viewers, media strategy executives must develop new business models and delivery mechanisms to make video downloading ad-supported and geek-free," says McQuivey.