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Video iTunes Leads Premiun Content Market

The momentum Apple created when it announced last year that it would sell videos online through iTunes continues into 2006. While the push to online video had started well before the launch of the video iPod -- demonstrated by skyrocketing advertising rates for broadband video impressions throughout 2005, and the launches of various online channels by large content companies -- the online video "big bang" started with Apple's announcement and continued through the Consumer Electronics Show.

"At this year's CES, gadgets took a backseat to the bevy of announcements by large online and content players," notes Mike Wolf, principal analyst of broadband and multimedia with ABI Research. "The flood of online content announcements from Google, Yahoo and others shows that after years of hesitation from the larger media players, the market for premium content online is finally beginning to take shape."

New offerings include those from Starz and Google. Nearly two years after announcing its Starz Ticket on Real, Starz launched its own premium movie subscription plan as Vongo, a $10 a month all-you-can-eat video download service. With Vongo, Starz is partnering with Microsoft, using WMV and Windows DRM to deliver the content, which will be available on Windows MCE PCs and Windows Portable Media Center devices. Google announced its premium video download service, Google Video Store. The new service uses Google's own video player and will offer content from partners such as CBS and the NBA.

As ABI Research noted in its recent report, although the online premium video market will continue to be dwarfed for the next five years by traditional distribution channels such as broadcast and cable, it will nevertheless grow rapidly, as large content providers offer their crown jewels for purchase over the Internet, and new platforms enable consumers to watch this video in whatever format they choose.

"As both content and platform providers enable an online video distribution chain, ABI Research believes that the premium online video market should grow 89 percent annually through 2010," says Wolf. "When companies such as Intel, with their new Viiv entertainment PC platform, and other large stakeholders such as Apple and Microsoft, focus their attention and resources, the combined impetus will force this market to expand, and consumers to open their wallets."

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