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Key Market Dynamics for Online Video Growth

While 2006 has seen a rapid increase in consumers' use of online video, spurred by the breakout success of websites such as YouTube, the vast majority of video content delivered over the Internet is still held captive on the PC.

ABI Research believes that the over the next five years new viewing options such as network-enabled video players and download-to-burn will add momentum and broaden the overall market by giving consumers additional choices in how they consume video content.

"The percentage of Internet-delivered video viewed on a portable device will go from just 3 percent today to 16 percent by 2011," says principal analyst Michael Wolf. "This move to portable viewing will be driven largely by a new class of devices with embedded networking connectivity and seamless integration with online video providers. As portable media hardware vendors such as Apple and Microsoft add networking connectivity to their products, and Sony moves away from UMD toward network-based video delivery for the PSP, more content will become portable as it becomes less dependant on the PC."

Networked portable media players will not be the only reason for increased momentum in Internet video. Content owners and aggregators are both expanding available libraries while adding new usage models for consumers. Recent moves by both CinemaNow and Movielink to allow for download-to-burn of Internet-delivered video has already resulted in increased adoption of these services, and ABI Research expects that expanded options such as these will continue to drive consumers toward the Internet as a source for video content.

"Download-to-burn and networked portable devices are just two examples of increased choice for consumers in how they view Internet-delivered video," says Wolf. "ABI Research believes that content companies, rather than adopting their historical 'hunker down' mentality in the face of new technology, are increasingly embracing these new usage models as they grapple with the maturation of the theatrical and traditional home video market, and become more comfortable with the underlying delivery and content protection frameworks."

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