Technology | Media | Telecommunications

Friday, October 08, 2010

Deja Vu for the Legacy Video Entertainment Industry

The video entertainment industry has slowly adapted to media distribution technology innovations over the years, including reluctantly acknowledging the invention of the home Video Cassette Recorder (VCR) and Digital Video Disc (DVD) recorder.

Now, as internet-based video streaming services and on-demand viewing of TV and movies has a growing impact on traditional revenue streams, the legacy media industry must adapt once again, according to the latest market study by In-Stat.

In-Stat believes that identifying the successful new services, licensing models, and associated business models will require continual trial and error by the big-media content producers and pay-TV distribution companies -- with no apparent certainty of success.

"The decline of retail video disc sales, coupled with on-demand viewing of TV content and the threat of video cord cutting, points to enormous changes ahead for the video entertainment industry," says Keith Nissen, Industry Analyst at In-Stat.

As new business models emerge, there will be winners and losers, with billions of dollars at stake. In-Stat's research identifies the potential revenue impact to players throughout the video value-chain, based on realistic scenarios.

In-Stat's latest market study findings include:

- Pay-TV operators generated $93 billion in 2009, but as TV viewing becomes more splintered and TV monthly rates rise, pay-TV operators run the risk of subscriber defections to low-cost alternative offerings.

- Premium channels (HBO, Showtime, etc.) are in competition with online video subscription services for both subscriber spending, as well as movie licensing rights.

- Broadcast TV advertising revenue is slowly declining as consumers shift attention from traditional pay-TV to over-the-top (OTT) video service offerings, such as Netflix and LOVEFiLM.

- Retail digital video disc sales are expected to drop by $4.6 billion from 2009 to 2014.

- The emergence of electronic sell-through for online video purchases and rentals will transform the digital entertainment industry over the next five years.

- Online VOD (Video-on-Demand) subscription revenue is expected to approach $3.5 billion by 2014.