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Analyst: Online video poised for growth spurt
(Video Business Via Thomson Dialog NewsEdge) While the online video market has been slower to grow than Hollywood and its technical partners anticipated, online video retail is nonetheless expected to expand more than fivefold in the next four years, from $252 million to $2.9 billion in consumer spending by 2011, according to research firm Understanding and Solutions.
The market is currently underperforming for a variety of reasons, said Mai Hoang, an Understanding and Solutions analyst. 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 U.S. will represent 8% of total home entertainment revenue, with Western Europe close behind at 7%.
Whats 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, continued Hoang. The new generation of high-definition video formats will also help to shore up packaged medias presence within home entertainment revenue streams.
In the U.S. home entertainment market, which is the largest, online video represents merely 1% of the market and is currently driven by two services: Apple iTunes, using the electronic sell-through model; and Xbox Live Video Marketplace, using online video-on-demand, the report says.
The iTunes Store, which according to iTunes representative Tom Numyer has sold in excess of 2 million movies, 100 million TV shows and 3 billion songs to date, is successful because of its competitive pricing structure, user-friendly interface and the iPods ubiquity, which has allowed iTunes to gain traction quickly, the report says. Apple reportedly is also close to announcing a rental service through iTunes, with 20th Century Fox as its first studio partner for rental.
Similarly, Microsofts Xbox Live Video Marketplace has boosted the online VOD movie market, bridging the gap between the PC and the TV and providing easily accessible high-definition content to consumers. Though many other players operate within this marketplace, so far no provider has been able to build comparable scale, the report says.
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, the report concludes.
Still, while there are plenty of new products coming to market, none have really excited consumers. That leads NPD Groups Russ Crupnick to believe that it will be the established companies with billing relationships to customers, such as cable providers, that are best positioned to lead in online video retail.
If I were a betting man, looking at this from a broader perspective, I would vote on VOD through your cable system, said Crupnick, VP and senior industry analyst for NPD Group.
Cable providers have market penetration, the billing relationship and a direct link to high-definition TV sets, Crupnick said.
Copyright 2007 Reed Business Information. All Rights Reserved.
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