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Vendor Bonus: Online Entertainment Bonanza

As broadcast TV, movies, and other professionally produced (i.e. typically very high-budget) content gets moved onto the Internet, huge opportunities are emerging for vendors who provide hardware, bandwidth and services, according to In-Stat.

The value of the annual infrastructure build-out for online entertainment services is expected to quintuple between 2007 and 2011, reaching more than $4.1 billion, the characteristically upbeat market research firm says. However, vendors may be the only members of the this ecosystem that see a meaningful profit from this high-stakes gamble.

I believe that when this storyline has run its course, some big media companies may actually end up wondering how they invested so heavily without a clear understanding of where the potential for profit really exists. Perhaps they're right, that exploiting online entertainment is just the same as prior media distribution channels. Frankly, I'm not convinced it is the same.

"Bandwidth is the largest value category, with Hardware holding onto a solid share," says Gerry Kaufhold, In-Stat analyst. "Key growth opportunities will arise for vendors who provide value-added services, such as online publishing, asset management, distribution, and
interfaces for billing and advertising services."

In-Stat's market study found the following:

- North America is the key market for online entertainment services, with Asia coming on strong in 2008.

- Online entertainment will be leveraged to improve TV network negotiating positions for Video-on-Demand.

- The "big name" media companies will establish ascendant positions for online entertainment.

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