Downloads to TV spending to hit $5 billion by 2013

Study credits more Internet-connected consoles, set-top boxes

By Danny King -- Video Business, 8/19/2008

AUG. 19 | U.S. consumer spending on direct-to-TV Internet video content will jump fivefold within the next five years as customers find more ways to connect their TVs to the Web with videogame consoles, video-on-demand set-top boxes and other components.

TV-related Internet-video revenue will surge to almost $5 billion annually by 2013, from less than $1 billion this year, and will account for 75% of all Internet-video revenue, research firm Parks Associates said in a report released last week. The trend is likely to benefit studios with large back catalogs, but cable companies looking to boost revenue from video-on-demand services could feel the brunt, the company said.

The forecast exceeds those of studios such as Lionsgate, which said in June that sales from digitally delivered content would more than double to almost $3.6 billion in 2013, from about $1.5 billion this year, despite U.S. home entertainment sales rising just 7% to $26.8 billion.

“We’ll continue to see more premium content make its way to electronic delivery formats, and we are also seeing the key trend of creating connected consumer electronics devices that will place the video right at the TV,” said Kurt Scherf, VP and principal analyst at Parks Associates.

Content distributors ranging from Blockbuster to Netflix to Amazon.com have recently started or overhauled services that let customers download or stream videos to their computers or TVs.

Blockbuster, the largest U.S. movie-rental chain, last month started beta-testing its Movielink download service on its Web site, while Amazon.com, the world’s largest Internet retailer, began preparing to replace its two-year-old download-based Unbox service with a streaming-based video-on-demand service.

And since May, Netflix, the largest U.S. rental service by mail, has signed agreements allowing its content to be streamed via LG Electronics’ Blu-ray Disc players, Microsoft’s Xbox 360 videogame consoles and its own Netflix Player by Roku.

As customers buy more TV and film titles from the Internet that can be sent directly to their TVs, they’re likely to spend less on video-on-demand services that cable companies have been counting on to help boost sales amid a flattening subscriber base, according to Scherf.

Meanwhile, studios and distributors looking to gain home-entertainment revenue by releasing newer titles on Blu-ray might also pick up sales from older titles by selling digital content.

“This can allow older content to be monetized in ways that weren't available just a few years ago, and it can allow the aggregators to use their advantages of scale to gain recurring revenues from content that is less-expensive to acquire,” Scherf said.