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Report: Online to Supplant TV, Cable Revenue in 10 Years

22 Apr, 2008 By: Erik Gruenwedel

Driven by the success of user-generated Web sites, video-on -demand (VOD), and TV broadcasters streaming content on proprietary and third-party sites, online will become a major means of distribution over the next decade, according to a new report.

Jim Bottoms, co-managing director of Understanding & Solutions, which released the report, said monthly global TV and cable subscriptions account for almost 50% of annual consumer expenditures on entertainment followed by DVD, music CD and video games.

He said online would displace TV and cable as consumers continue to seek out entertainment via the Internet.

“Until recently, most consumers in Europe accessed video content on DVD or watched traditional linear TV,” Bottoms said. “Yet things have changed with a raft of digital platforms and the rise of on-demand content.”

He said, however, that Web-based VOD continues to be hamstrung by consumer desires to watch content on their TV and not computer screens. In addition, Bottoms said competition to cable VOD continues to escalate with TV broadcasters ramping up efforts to repurpose network programming as ad-supported content online.

The principle driver of online video remains repurposed TV programming, but the report said extracting incremental revenue would require engaging a wider audience more effectively.

“Online TV advertising could achieve revenue of at least $10 billion worldwide by 2011, which equates to 18% of the Internet advertising market for that year,” said the report.

The study said the industry mindset of a “one-size fits all” for entertainment distribution has to change in relation to consumer viewing habits and schedules.

“Online TV will challenge the traditional broadcast industry by vying for content rights, the ability to offer on-demand linear broadcast and the generation of advertising revenue,” said Alison Casey, head of global content at Understanding & Solutions. “The competitive structure of the market will be under threat as new webcasters compete with conventional broadcast channels for audiences and advertiser money.”

Understanding & Solutions will host a conference on the report June 5-6 in London. See www.uands.com/ddc08 for more information.

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