Internet TV ‘goldrush’: Advertising revenues on track for $10bn worldwide

Internet TV ‘goldrush’: Advertising revenues on track for $10bn worldwide

Internet TV advertising could achieve revenues of up to $10bn worldwide by 2011, according to a new industry report from Understanding & Solutions. This equates to 18% of the Internet advertising market for that year, forecast at $57bn.

Delivery of television content over the Internet is nothing new, with a whole host of websites across the globe providing hundreds of free TV channels, many of which are pirated or re-transmitted without permission. However, there is an Internet TV ‘goldrush’ in progress, as mainstream broadcasters, cable networks and TV content producers move their content online alongside a new raft of legitimate ‘Webcasters’ (Internet Video and TV aggregators) like Joost, Vudu and Babelgum.

“The level of penetration already achieved by Internet video is mind-blowing,” says John Bird, Principal Consultant with Understanding & Solutions. “Globally, we estimate there are more than 20 billion videos being streamed across the web each and every month. In the US alone, active Internet video users are streaming an average of 55 videos per month – and this is just the beginning.”

User-generated content sites, particularly YouTube, and social networking websites such as MySpace and Facebook, are well-placed to develop ‘legitimate’ TV distribution, potentially bringing audiences of millions to the entertainment industry.

Meanwhile, videogame hardware vendors Microsoft and Sony are seeking to leverage their large user bases with added value online video services –Sony is also aiming to deliver HD Internet content direct to its Bravia TVs using Internet Video Link.

Apple, the number one player in digital music, is intensifying its Apple TV proposition through a tie-up with YouTube; partnerships with additional major studios are also expected and will expand Apple’s range of video and TV content, including a possible film rental service.

Leading file-sharing networks like BitTorrent and LimeWire are moving into the market with legitimate video content but, like user-generated sites, it will be difficult for them to reconcile the continued presence of ‘free’ (illicit) content on their usernets.

Attracted by a new generation of PC-centric consumer and the phenomenal success of video sharing websites, broadcasters are also looking to gain from the anticipated growth.

Online video is growing at around 200% each year and, going forward, television will be a primary driver. Major US broadcast networks are already reporting tens of millions of streams monthly from their websites, but to build sustainable revenues the industry needs to effectively engage with consumers to understand what works, it needs to establish re-transmission rights and develop audience measurement techniques.

Unlike music and film industries, which operate with paid-for content, television is predominantly a free-to-air market and lends itself to the Internet. The challenge for the industry will be in harnessing the power of the medium and developing the revenues through sponsorship, advertising, subscription and paid-for business models. Piracy and ‘free’ TV content on file-sharing networks will be an endemic problem faced by the emerging business, as has been the case for the music industry over the last 10 years.

Clearly, Internet TV will become a crowded space and many of the would-be players are not going to survive. Most, if not all, are relying on the ‘wow factor’, but content relationships and the development of stable, measurable audiences will be the keys to success. The eventual winners will be those most able to sustain investment over the next two to three years.

“Internet TV will challenge the traditional broadcast industry through rights distribution, on-demand content versus linear broadcast and the generation of advertising revenues,” says Alison Casey, Business Director: Content & Services, 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. The national boundaries which govern broadcasting today will also be challenged by the global nature of the Internet, as has been the case with e-Commerce.”

Going forward, Broadband Service Providers, who are on fixed revenue models, will need to invest in more infrastructure as and when high quality Internet TV and online film distribution becomes widespread, raising issues of higher consumer tariffs and possible revenue sharing with content owners.

As business models are trialled, the majority of Internet TV content will be free to users over the next one or two years, with services largely focused on the PC and handheld products. Some technical innovators and early adopters are already networking Internet TV to their primary television screens, but it will be another three years before the technology is widely-accepted as a conventional system for delivering content to the living room.

Authorised use of information

All information provided by Understanding & Solutions in any form is proprietary information that belongs to Understanding & Solutions and is protected by UK and international copyright law. Except as outlined below, direct or indirect reproduction of information, in whole or in part and by any means, is prohibited without the express written consent of Understanding & Solutions.

Members of the press may use a press release in its entirety or take segments from it as necessary; they may also use a graph, a slide, or a section of a supplied research report less than fifty words long, provided all text is identified as “Source: Understanding & Solutions” and all graphics are credited with “Understanding & Solutions, Copyright 2007″.

Further Information

For industry comment, forecasting and trends, contact:

Andy C Watson

Head of Marketing & PR

Understanding & Solutions

Direct Dial: +44 1582 500169

Email: andy.watson {at} uands(.)com

Web: www.uands.com

Two diary dates:

ESCA Europe
18 – 19 September 2007, Madrid
A two-day conference focusing on the European entertainment supply chain issues and looking to what the future is likely to hold

High Definition in Europe: conveying the message
12-13 November 2007, Barcelona
An Understanding & Solutions conference exploring High Definition and its role within broadcast, programming, equipment and disc media sectors.

Understanding & Solutions Ltd. Registered in England No. 2293034
6 Kensworth Gate, 200-204 High Street South, Dunstable, Bedfordshire LU6 3HS