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Video Download Business is Still Experimental

Better-than-expected sales for online downloads of TV series are raising expectations after Apple recently announced more than 15 million purchases since video debuted on iTunes last October. While initial results are encouraging, the video download business is still in an experimental phase. Kagan Research says that the early high volume is due in part to both the novelty and "early adopters" with abnormally high buy rates.

"Video downloads as offered in their present form are not likely to be a huge business for content owners," says Deana Myers, senior analyst at Kagan Research. "Once content owners figure out what model � or models � work best for Internet delivery of on-demand video, revenues could be significant. For example, content owners could allow higher-quality downloads that enable consumers to burn personal DVDs. They would be priced higher than downloads today, as they will compete with pre-recorded DVDs."

In a keynote delivered to the 23rd Annual Kagan Radio/TV Values & Finance Summit March 23 in New York City, Jay Ireland, president of NBC Universal Television Stations, noted that a staggering 5 billion downloads of TV series episodes at a retail $2 per segment would be necessary to match NBC Television�s existing $7 billion in annual revenue. That underscores how much traffic downloads would need to eclipse existing media revenue.

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