Paid Video Out, Ad Video In
According to an America’s Network article, paid video downloads are on the way out and advertising based video downloads are on the way in.
Now it might not take a genius to figure out that people are more likely to download a video sprinkled with a few ads over shelling out hard earned cash, but according to America’s Network it seems that Forrester Research felt like digging a little deeper to prove the point.
It may still be a little early to declare paid video dead as America’s Network states “The research firm (Forrester) branded the paid video download market as a dead end and will have its swan song in 2007 when it is projected to generate $279 million in revenue, up from $98 million last year.”
184% growth is good by any standards, but America’s Network reports “The research outfit based its conclusion on a recent survey that showed that only 9% of online adults have ever paid to download a movie or TV show offered in the past year by companies such as Apple, Amazon, Microsoft and Wal-Mart.”
James McQuivey with Forrester argues “The paid download market, however, is ultimately a dead end. To attract mainstream viewers, media strategy executives must develop new business models and delivery mechanisms to make video downloading ad-supported and geek free.”
Of course the elephant in the room is the fact that most US households don’t have a device to view paid video downloads on their television. One has to wonder if the low interest in paid video downloads is caused by the need to watch these paid videos on the “small screen”.
Video downloads have been with us in one form or another for quite a while. Pay Per View is a form of paid video downloads and is wildly popular among cable subscribers. Based on the numbers reported by Forrester it doesn’t look like they’re figuring PPV sales into their report (likely because it’s not delivered via the Internet), but from the customer’s perspective I’m not sure a delineation is drawn between which network their video download was delivered on.
Once devices like Apple’s iTV start to blur the line between Internet downloads and traditional PPV downloads, I think you’ll see the paid video download market expand at an even greater rate than ad based downloads (in terms of revenue). While paid video downloads will have there fair share of competition from ad based iTV specific offerings (e.g. Google Video and YouTube), there will always be a demand for premium content delivered via a paid model. An advertising based video download model works well for short clips like the latest Diet Coke and Mentos video, but it’s unlikely that copyright holders of movies or even television programming will be moved by this model.
In short, I feel that the report by Forrester is based on today’s world and doesn’t take into account the expansion of television based viewing platforms like iTV. I predict that as these devices increasingly penetrate US households, the likelihood that US consumers will shell out cash to download their favorite movie or television show via the internet will increase.