Billion Dollar Opportunity: Internet Video Services Primed for Explosive Growth, According to IDC

FRAMINGHAM, MA – APRIL 5, 2006 – Internet video services are on the brink of becoming a mainstream phenomenon in the United States. According to a new forecast from IDC, Internet video services will generate over $1.7 billion in revenues by 2010, an increase of more than $1.5 billion from 2005 totals. Much of this growth will be fueled by a surge in the amount of premium content made available online. However, IDC cautioned that the market's potential could be dampened by key technical and legal hurdles.

The market for Internet video services began its dramatic acceleration in 2005 as content owners, once unwilling to offer their products online, started to experiment with digital distribution as a way to complement and enhance their existing business models and to stem illegal P2P file sharing and piracy. In particular, the television networks' decision to offer episodes from new shows as well as old sparked significant interest in Internet video. Television content, which is available in ample amounts and is ideally suited for the PC, is expected to be an integral component to revenue growth throughout the forecast period.

"The Internet video market has huge upside. With that upside, however, comes the risk to content owners of cannibalizing existing revenue streams," said Josh Martin, associate research analyst in IDC's Consumer Markets: Video program. "In order to properly take advantage of this emerging market, content owners to aggregators to consumer electronics manufacturers must understand the challenges the market faces and how to overcome them."

Key drivers for the adoption of Internet video include the expansion of premium content offerings online and the emergence of home networking solutions that allow consumers to more easily view Internet content on their televisions. As services become increasingly common, content owners will leverage Internet video to complement their existing revenue streams and to generate additional revenue from archived content and new content created specifically for the service.

IDC expects content owners will migrate toward three basic service types. Advertising-based services will remain the dominant type of Internet video service, although its share of total market revenue will decline as a la carte services, buoyed by consumer familiarity with iTunes, grow dramatically over the next 2-3 years. Subscription-based services will experience steady growth throughout the forecast period, enhanced somewhat by the emergence of home networking solutions that make subscriptions more appealing to consumers.

In order to sustain the momentum gathered in 2005 and maximize opportunities for success, content owners and service providers will need to overcome several important problems, including licensing issues, inadequate video search, competitive challenges, and the issue of how to move content beyond the PC. IDC believes that companies involved from the creation to distribution of content will have to partner with others across the value chain to create appealing, flexible services that will evolve into viable businesses.

The IDC study, Ready, Set, Watch: U.S. Internet Video Forecast and Analysis 2005-2010 (IDC #35090) presents the 2006 – 2010 forecast for U.S. Internet video revenue. The report identifies the key content types and business models, profiles the leading vendors, and examines the market's opportunities and challenges. Revenue forecasts are broken down by service and content types.

To purchase this document, call IDC's Sales hotline at 508-988-7988 or email sales@idc.com.

About IDC

IDC is the premier global market intelligence and advisory firm in the information technology and telecommunications industries. We analyze and predict technology trends so that our clients can make strategic, fact-based decisions on IT purchases and business strategy. Over 700 IDC analysts in 50 countries provide local expertise and insights on technology markets. Business executives and IT managers have relied for 40 years on our advice to make decisions that contribute to the success of their organizations.

IDC is a division of IDG, the world's leading technology media, research, and events company. Additional information can be found at http://www.idc.com.

All product and company names may be trademarks or registered trademarks of their respective holders.

###