A TREND THAT STARTED with personal video recorders is continuing to transform the video industry, as consumers demand greater flexibility and convenience in acquiring entertainment content.
According to market research firm In-Stat, revenue from retail video disc sales and rentals will continue to decline, with no leveling in sight. On-demand viewing of TV programs and movies in the U.S., however, is expected to generate $10 billion dollars in annual revenue by 2014.
Overall, In-Stat predicts that there will be three growing on-demand video revenue streams as follows:
– Transaction- Video-on-Demand (T-VOD), which encompasses on-line TV rentals, pay-TV VOD rentals and pay-per-view;
– Subscription VOD (S-VOD), which includes on-line video subscription services, premium TV channels, as well as free VOD with a pay-TV service; and
– Electronic Sell-Through (EST), which covers the purchase of TV and movie content, independent of subsequent content delivery methods.
“The transition to on-demand video does not mean that linear TV is coming to an end,” said principal analyst Keith Nissen, in a press release. “What we are seeing is the economics of the digital entertainment world have begun to shift. The future will be a hybrid ecosystem, made up of both linear TV and on-demand video revenue streams.
The success of on-demand EST will hinge primarily on the buy vs. rent decision, the research report continues. Realistically, EST cannot replace historic retail DVD video sales. However, the migration of DVD rentals to online T-VOD services will help fill this revenue gap. Subscription VOD will see the highest growth rate, but also the most intense competition.
“Pay-TV and broadcast TV services still generate the majority of the revenue, but both business models are currently under stress", Nissen added. "On-demand viewing of video content, whether by transaction or subscription, is taking hold. In order to ensure the continuation of existing revenue streams, new value propositions must be created.”
This research is part of In-Stat’s Multiscreen Content Delivery service which provides comprehensive analysis of the transformational shifts in digital entertainment networks and business models, including Internet video, interactive advertising, CDNs, and interactive program guides.
