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August 26, 2009

Inflection Point for Internet TV in 2014?

By Gary Kim, Contributing Editor

Internet-enabled TVs, though representing only about three percent of sales in 2009, might reach 24 percent of sales by 2013, say analysts at Parks Research. All other things being equal, that should depress sales of physical media and increase sales and use of Internet-delivered media, one logically would conclude.

But there is no flash cut from older distribution methods to new, which is why firms such as Netflix gradually are rolling out Internet-based services. But the key, for movies, videos and games, is willingness of content owners to disrupt their own established revenue formulas and channels.
But they will do so only when confident that any major change in distribution will not erode overall revenues. And the big threat is damage to the DVD revenue stream that online will not replace.
The problem is that overall viewing of Netflix-style streaming services will not really take off until consumers can watch the "hot" content at about the same time they now expect to, with reasonable expectations about quality, ease of use and price.
Consumers might well expect to be able to pause, rewind, fast forward and view more than once over a rental period. So it is not simply a matter of the content users want, at prices they will pay, but also replicating some of the key capabilities the older end user experience provided.
Amazon launched an online casual gaming portal in February 2009. In April 2009, Amazon added HD shows and movies through its Amazon Video On Demand service. Netflix and Blockbuster both offer digitally streamed HD content, as well.
Consumers might be waiting to see how well such chores are handled, as blu-ray player sales seem not to be on the same adoption curve as DVD players. At the end of the first five years of availability, DVD players had an order of magnitude more sales than blu-ray players have gotten so far, according to the Consumer Electronics Association (News - Alert).

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Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Stefania Viscusi

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