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The Global Outlook for Video Download Sales

Dec 18, 2006 12:00 PM

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Custom installers who haven’t hopped on the networked entertainment bus may want to revisit their New Year’s resolutions for 2007. According to technology market research firm Strategy Analytics, consumers are itching for online video purchase opportunities, and the market is poised to give them what they want.

“2007 will be remembered as the year in which online sales of prerecorded video finally became a real business,” says Martin Olausson, senior analyst at the Strategy Analytics broadband media and communications service. Comparing the interest in video to the thriving online music market, Olausson says online delivery of video content is now emerging as a viable and increasingly important distribution channel for content owners.

In its report titled, “The Video Store Goes Virtual: The Global Outlook for Online Video Sales,” Strategy Analytics predicts that online sales of TV shows, movies, and other prerecorded video will catapult to a billion-dollar business in 2007. Sales of video downloads will total $298 million for 2006, according to the company, but will leap to $1.5 billion by this time next year. By 2010, the report continues, global revenue from online video sales, rentals, and subscriptions are expected to reach $5.9 billion and comprise 8 percent of total home video industry revenues.

The growth will be fueled not only by existing video download models including Apple’s iTunes store, but by a proliferation of distributors and payment models. Wal-Mart will likely emerge as a major player in the download space in the same way it has dominated DVD sales at retail. The chain currently accounts for 40 percent of DVD sales in the U.S. and recently launched its own download service at the end of November.

For now, at least, Wal-Mart is using its nascent, and limited, download service as a way to supplement DVD sales. Consumers who buy the hard copy of Superman Returns have the option to tack on software versions that play back on a portable media device. The download formats are priced at $1.97 for portable devices, $2.97 for PCs/laptops, and $3.97 for a portable player and PC bundle.

Titles with the added download feature are marked with a sticker on the front of the DVD. Consumers go to a website, download software and then pay for the version they want. The Superman offering is the first in a test of DVD/download bundles. The company also says it plans to test a movie and TV download service.

The Wal-Mart trial comes after Amazon launched its video download service in September. According to Strategy Analytics, Time Warner and Netflix are expected to enter the download market soon too. The research firm says pay-to-own downloads account for most online video revenues today, but other payment models will emerge as a significant part of the market down the line. The company projects that by 2010 rentals and subscription-based services will account for a quarter of annual online video sales to consumers.

“Millions of households around the world are adopting broadband every month,” says James Penhune, director of the Strategy Analytics broadband media and communications service. “Our consumer research shows strong pent-up interest in accessing movies, TV shows, and other video online.”

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