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How to Harness the Internet TV Opportunity

Internet TV advertising could achieve revenues of up to $10 billion worldwide by 2011, according to a new industry report from Understanding & Solutions (U&S). This equates to 18 percent of the Internet advertising market for that year, forecast at $57 billion.

Delivery of television content over the Internet is nothing new, with a whole host of websites across the globe already providing hundreds of free (advertiser supported) TV channels -- some of which are pirated or re-transmitted without permission from the video content source.

However, U&S believes that there is an Internet TV gold-rush in progress, as mainstream broadcasters, cable networks and TV content producers move their content online alongside a new raft of Webcasters (Internet Video and TV aggregators) like Joost, Vudu and Babelgum.

"The level of penetration already achieved by Internet video is mind-blowing," says John Bird, Principal Consultant with Understanding & Solutions. "Globally, we estimate there are more than 20 billion videos being streamed across the web each and every month. In the U.S. alone, active Internet video users are streaming an average of 55 videos per month -- and this is just the beginning."

User-generated content sites, particularly YouTube, and social networking websites such as MySpace and Facebook, are well-placed to develop legitimate TV distribution, potentially bringing audiences of millions to the entertainment industry. Meanwhile,video game hardware vendors Microsoft and Sony are seeking to leverage their large user bases with added value online video services.

Sony is also aiming to deliver HD Internet content direct to its Bravia TVs using their Internet Video Link. Apple, the number one player in digital music, is intensifying its Apple TV proposition through a partnership with YouTube -- partnerships with additional major studios are also expected and will expand Apple's range of video and TV content, possibly including a film rental service.

Leading file-sharing networks like BitTorrent and LimeWire are moving into the market with legitimate video content but, like user-generated sites, it will be difficult for them to reconcile the continued presence of unauthorized content on their P2P networks, according to the U&S market assessment.

Attracted by a new generation of PC-centric consumers and the phenomenal success of video sharing websites, traditional broadcasters are also looking to gain from the anticipated growth. Online video is growing at around 200 percent each year and, going forward, streamed television will be a primary driver.

Major U.S. broadcast networks are already reporting tens of millions of streams monthly from their websites, but to build sustainable revenues the industry needs to effectively engage with consumers to understand what works. U&S believes that they also need to establish re-transmission rights and develop audience measurement techniques.

Unlike music and film industries, which operate with paid-for content, television is predominantly a free-to-air market and lends itself to the Internet. The challenge for the industry will be in harnessing the power of the medium and developing the revenues through sponsorship, advertising, subscription and fee-based business models.

Piracy and free TV content on file-sharing networks will be an endemic problem faced by the emerging business, as has been the case for the music industry over the last 10 years. Internet TV will become a crowded space and many of the would-be players are not going to survive, according to U&S assessment.

Most, if not all, are relying on the wow factor, but content relationships and the development of stable, measurable audiences will be the keys to success. U&S believes that the eventual winners will be those most able to sustain investment over the next two to three years.

In contrast, I believe that the key to success will be inventing innovative business processes that pro-actively enable niche content to consistently find and engage its full potential audience online.

"Internet TV will challenge the traditional broadcast industry through rights distribution, on-demand content versus linear broadcast and the generation of advertising revenues," says Alison Casey, Business Director at Understanding & Solutions. "The competitive structure of the market will be under threat as new Webcasters compete with conventional broadcast channels for audiences and advertiser money. The national boundaries which govern broadcasting today will also be challenged by the global nature of the Internet, as has been the case with eCommerce."

I believe that 'persona profile' aggregation -- for want of a better term -- will become the strategic imperative that builds the foundation for successful models. Automated tools that enable content discovery via recommendations that are based upon prior usage characteristics will be essential. Supplemental lifestyle/interest related content suggestions will come from friends and family via word-of-mouth that's exchanged by built-in social network capabilities.

Moreover, in the legacy 'closed' mass-market model, the scarcity of distribution channels and available content placed the emphasis on gate-keeping control and containment skills. In contrast, within the emerging 'open' and fragmented micro-market model, the abundance of both channels and content will place a premium on attraction and engagement skills.

This is the essence of the business challenge, and the associated market opportunity. It has become a key focal point of my own ongoing research, and therefore the evolving value proposition of GeoActive Group USA -- as an essential ingredient of the advisory services that we provide our clients.

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