Revenue from on-demand viewing of TV programs and movies in the U.S. will grow to $10 billion annually by 2014, according to a forecast from In-Stat, thanks in no small part to the advent of digital video recorders and the continuing convergence of digital media.
In its latest research report, “The Battle for OTT Video: Redistributing Video Industry Dollars,” In-Stat also forecasts that U.S. TV download revenue will more than triple between this year and 2014 while online à la carte rental of TV episodes will compete directly with online subscription TV services such as Hulu and Netflix, a development that may have a negative impact the use of TV Everywhere services.
In its report, In-Stat’s researchers identify three on-demand video revenue streams: transaction video-on-demand (T-VOD), which includes rentals and pay-per-view, subscription VOD (S-VOD), which includes online video subscription services, premium TV channels and free VOD and pay-TV service; and electronic sell-through (EST), which includes the purchase of TV and movie content independent of subsequent content delivery methods. They forecast growth in all three of these market segments while sales and rentals and video discs and pay-per-view TV rentals decline.
“The transition to on-demand video does not mean that linear TV is coming to an end,” principal analyst Keith Nissen said. “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.
“Pay-TV and broadcast TV services still generate the majority of the revenue, but both business models are currently under stress. 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.”