The paid video download market is a dead end, according to a new report by Forrester Research, Inc. Forrester estimates that paid video downloads will peak in 2007, generating $279 million in revenue, up from $98 million last year. Instead, advertising models will drive the online video market.
In the past year, companies such as Apple, Amazon, Microsoft, and Wal-Mart have begun offering consumers the ability to download television programs and movies to own or rent. But a recent Forrester survey showed that only nine percent of online adults have ever paid to download a movie or TV show. Furthermore, an analysis of these consumers showed they are a niche of media junkies willing to spend heavily on such content; they do not represent the vanguard of a rush by mainstream consumers. Without mainstream viewers joining the party, the video download market will not grow fast enough to support the ambitions of all the companies involved.
“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, in the press release. “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.”
Other implications of such a market shift include:
• Set-top boxes give in to Internet video. Apple will have to rethink Apple TV, shifting it from a closed pay-per-view system to an ad-supported, broadband service provider model that puts YouTube videos as well as ABC.com TV shows directly on the TV. At the same time, Internet-friendly set-top boxes from Cisco and Motorola will give Comcast and Time Warner a way to offer competing Internet-based, ad-supported content.
• Television networks allow ad-supported downloads of prime-time TV shows. New technology such as the recently announced Adobe Media Player will allow consumers to download video for playback without losing the ads that were sold with the video. Expect ABC to go first in 2008, with other networks quickly following.
• Paid video download pioneers CinemaNow and Movielink shift their expertise to partner with satellite and telco service providers provide video-on-demand (VOD) content without a huge investment in VOD infrastructure.
• Streaming of ad-supported TV shows eclipses DVR use by the end of 2008. Advertisers will cheer because this shift thwarts ad-skipping; consumers will applaud this breakthrough because it’s cheaper than a DVR and is more flexible.
“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.
The report “Paid Video Downloads Give Way To Ad Models” includes recommendations for media executives and is currently available to Forrester RoleView clients. It can also be purchased directly at http://www.forrester.com/Research/Document/Excerpt/0,7211,42291,00.html
Apple has already signaled their intention to continually develop new software features for Apple TV via free software and/or firmware updates and hinted at iTunes Store video rentals in the future. Please see related articles below.
Apple TV is ahead of its time, but people always refer to it as a one-trick pony. It’s not.
The movie downloads are really a few years off, but not because of the abilities of the average person. It’s because of bandwidth limitations. When the day comes that people will be able to download at rates nearer to 15 mb/sec (or fast enough to stream) then it will take off.
Until then, the ability to send photos and music and other from five computers different computers makes it worth $299 to a lot of people.
I’ll bet people said that MP3s were a dead-end at one time until the iPod came along. The difference here is that Apple is at the front of a trend. The impact will be slowly felt, but also hard felt.
Rentals is where it’s at with this technology.
That will be the only thing that gets me to cancel my Netflix subscription and start renting from iTUNES.
I no longer subscribe to cable TV. The amount of commercials per hour has nearly doubled from 20 years ago. When I travel and watch TV in hotel rooms, I feel like I am being hit over the head with a sledge hammer with all the ads.
I am a big movie fan and love watching TV shows on DVD with my 10k worth of home entertainment gear, but I refuse to be assaulted by obnoxious commercials which are often times 10dB louder in volume than the program portion!
Some channels seem to have more commercials per hour than actual program!
Any feed that is laced with these obnoxious ads will be avoided like the plague in my home.
boeing777,
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Speak for yourself, I like the MDN comments. So there is no do “us” a favour. Your the only one being a ass here.
Is this Forrester Research in any way connected to the Forrester Research, who in Dec 2006 predicted that iTunes sales were plummeting ?
Or are they in any way related to the Forrester Research, who in July 2006 blogged “And Zune could be one vehicle to displacing Apple’s dominance.”
Why should anybody care what their opinion about video downloads might be ?
Without reliably faster bandwidth downloading films seems useful only for the very patient.
Sometimes, one has to ask just simple questions to hopefully arrive at logical answers:
1) As long as there are people who like to own video products (movies, TV shows etc) and now go out and buy DVDs, video downloads-to-own will continue to be viable. Just like music downloads are slowly, but some would say surely, sending the CD to Dodoland, video downloads will eventually grab a good share of the present DVD market.
2) Ditto for rentals. Instead of running out to the DVD store on Friday evenings, people will settle in and just download a rental movie.
The AppleTV is being associated too much with iTunes sales. Just as the majority of content on iPods is not bought from iTunes, the bulk of video that people stream via AppleTV need not necessarily be stuff bought (and/or rented) from iTunes.
Video is big and getting bigger on computers. Logically, most people would prefer to view it on TV. AppleTV simply fills that need.
@Twilightmoon,
Have you actually seen an AppleTV work? I went to an Apple store to see for myself and was very disappointed. So you may be right that it’s ahead of its time, etc, but for right now it had better get an audience or it won’t be around in the future.
mm:
I agree that the advertising model is deeply ingrained. There are, however, quite a few countries where TV developed without ads, where ads are a relatively late phenomena (compared to the age of TV). It won’t be a walk in the park, but I really can’t see that ad-driven TV can be the only way. It’s not like ads make TV free. If you find another way to channel the same money, so those who pay (you and me) can have a more direct impact on what is produced, it ought to be able to improve quality dramatically. Apart from the godsend of getting rid of commercials.
80211.n is one of the keys. No one wants to wait long to download a movie. This weekend I rented Mission Impossible 3 for a buck at Kroger on one of their cool touch screen movie vending machines. Cheap, but they nail you if you don’t return it in 24 hours. iTunes movie downloads have to be cheaper to purchase, download, and own than it costs to buy one at WalMart.
i don’t find this analysis credible at all.
wasn’t forrester wrong, or misquoted earlier ?
Apple does not need to re-think anything.
I think the point is that we need to rethink our viewing habits. (by ‘we’ I meant ‘you’ actually)
The current world population consumes an unhealthy amount of TV continuously fed/dripped through a cable or the aerial.
Think about when you go to the theater and see a great show (or the cinema). The chaos before the show. The show. The silence after the show. That is what makes the show great.
The true appreciation of the show cannot possibly appreciated to it’s fullest if there isn’t a silence. A time to think or discuss the show.
TV does not provide that silence. Instead it sucks you in and when you eventually do tear youself away you feel like shit.
If you haven’t already guessed I don’t watch TV. I live in Japan and choose not to get foreign cable TV although I could for $50 a month. Instead I watch a couple of movies, an episode of Lost, and a couple of podcasts per week, and a couple of news podcasts per day.
My weather infomation is on my computer (soon to be my iPhone) anytime I need it. An I read the news topics which interest me on my cumputer every morning.
Apple TV is an initiative to give the world a choice (well the US only so far). The choice is actually having a life of culture and new experience when you are in the mood to consume it. For a fee (which will likely get cheaper as time goes on) you get access to the worlds best content very very easily accessed from your TV. It’s perfect for me as I am in complete control of my life of entertainment.
I think Apple is aiming to open more people to this world of choice away from the energy sucking TV industry.
Maybe you should try switching off the TV for a month… I guarentee you will get more stuff done and feel much healthier. But also you will remember what you watch and appreciate media on a deeper level.
Many consumers already pay significant $’s for DVR’s and maintenance of those system (subscriptions to guide services or rentals). In addition, many are fed up with rising cable rates with diminishing returns, bad service, and a few HDTV channels. Satellite service sucks.
Many consumers are waiting for a convergence of easy to use technology at an affordable price. It may not happen this year or next… but the cable companies are the ones that need to worry. Apple is at the Vanguard of this transition. I suspect they will do for TV and movie content what they did for music.
Finally, people at commercials. If they can lower their total cost of media consumption, or at least have it equal – why would they not just own the media and view it commercial free.
Forrester is right about the advertising aspect.
The people who own the content and/or those who control the signal will never stop thinking of ways to make a buck with force-fed advertising.
These capitalists are in competition with the geeks, who are on a mission to stop these annoying and tasteless interruptions.
Our quality of life is poisoned by commercialism.
Maczealot:
We have realiable IPTV with pay-per-view, so I can’t see movie downloads as a big problem. But then, I live in a civilized country
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Wirelessly distributed around the house, on the cheap, I might add.
WOW (as in the wow starts here! not at M$
” width=”19″ height=”19″ alt=”grin” style=”border:0;” /> ) look at the responders for this thread. !!
I just get the impression from Forrester that if he did not invent it, he does not like it.
” width=”19″ height=”19″ alt=”grin” style=”border:0;” /> While I do think that there will be (is ongoing) a shakeup in the whole industry, I really dont know where it will be going. I don’t think anyone does.
But I do think that Apple has a really good start on the situation. Apple products are REALLY good at what they do, and they are programmable so you can tweak them as you go.
I think Apple will do OK, —- assuming Microsoft does not screw up the whole country as it struggles in its death throws with this patent thing. You know, if you have no concept of innovating, just patent everything on the earth, get it thru some stupid patent person and then crash the system trying to get money out of it.
Ballmer “Greed is good and total control is our goal!! “
en
Tom:
I couldn’t have said it better. I’m not quite there yet (quitting TV as we know it, or Ad-Driven Distractions, ADD), but I’m getting there. And good riddance it will be. Hopefully AppleTV can be one vehicle for making this easier, not just for me, but for others as well.
boeing777, spare us your useless comments, we can read…..
themotie: “We are quite a few who want desperately to pay upfront for what we actually want to see, instead of paying the hidden commercial tax on everything we buy”
Amen! Now that movie theatres have decided they need to force ut to watch commercials before every movie we see in the theatre (not trailers, but COMMERCIALS for cars, insurance, credit cards etc!!!) for movies we pay TEN DOLLARS+++ to see.. I’ve already cut down dramatically on how much I go to the theatre.. its insulting that we should be forced to sit through that on top of very expensive theatre tickets. I have PLENTY of other options for my entertainment dollars and time, so I can take my money elsewhere.
One of the best things about the content on iTS is it has NO COMMERCIALS!
The AppleTV would be a massive success if 3 things happen:
1) bring TV shows & movies to Europe
2) offer TV shows & movies in HD (720p is more than enough)
3) lower the price of movies ($9.99/$12.99/$14.99 is way too much, you might as well order DVD’s from the net, or use BitTorrent to download free movies. An online movie should be $4.99 max).
I think points 1 and 2 will happen, but I’m not sure the studios will ever be smart enough to allow point 3 to happen… and this could indeed mean that AppleTV will fail miserably… too bad.
Regardless of Forrester’s track record, I agree with them. In the time that iTS has been selling TV shows, I’ve purchased exactly one – a couple weeks ago when I accidently recorded over Survivor before I watched it, and found that CBS’s idiotic InnerTube service doesn’t work with Macs (figure it out CBS, NBC and ABC work just fine on Macs!). The free content on the other network’s online channels are probably closer to the future of TV IMO. Now if Apple can work it so Apple TV can access them, that would really be something. I don’t mind ads in TV (although space them out a little more in Lost, huh?). I work in advertising, so I don’t want them to go away, but the models that the networks are using, or planning to use, where ads will be tuned to your tastes, makes a lot more sense to me.
If nothing else, Apple has proven to be a company that is always thinking ahead (like by having OS X running on Intel for 5 years before they switched). I feel pretty confident that they have allowed for all sorts of scenarios with Apple TV.
I think this guys on drugs. Hello, Disney just reported millions in profits thanks to your so called dead video downloads moron!
Apple/Google = TV Broadcasting DEAD
Google and Apple are working on a joint partnership to allow 1 ad to be inserted at the beginning of an iTunes TV download. iPod upgrades ensure the Ad cannot be skipped. In return, revenue from Ad’s offset consumers’ download costs and pay for the cost paid to the networks.
Why doesn’t Apple do this themselves (sans Google)? Well, Google already has the tech in place to serve Ads up on the fly. These Ads could be local in nature (for instance, people downloading ITunes TV shows in a 5 square block location in New York could receive a local Pizza joint ad. However, Apple still may choose to do this themselves.
As for movies, the Rental store will kick butt especially considering that retals will be around $3.99 each and if you decide to purchase, you will get a $3.99 credit towards that movie purchase. It will destroy Blockbuster.
I won’t pay for inferior products and apple tv is inferior. Yes it’s a great concept but it doesn’t offer HD quality and that is everything to me. Apple, get HD on apple tv and I am there. Get DVD quality movie downloads that I can burn to disk and I am there. Until then it just falls short. So off to walmart to buy dvd’s and I’ll just stick to direct tv for my HD stuff.
I like the MDN comments and takes. That’s what makes it different from all the other mac news sites.
As an addition, to completely KILL broadcasting, there needs to be an iTunes solution for LIVE sports and LIVE news streaming.
Basically a subscription to stream LIVE tv and then offer NFL/MLB/NBA/NHL and even bigger, Euro League soccer (huge worldwide draw). Also, major news networks, ABC, FOX, CNN, NBC, CBS, BBC, CBC, etc. would need to be streamed.
This would put the nail in the coffin. Period. If your AppleTV downloaded those streams or you could DL them after a game was played, it could be huge too for people who miss the live stream.