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Content Owners Preparing for OTT Windfall

According to a market study by The Diffusion Group (TDG), revenue from the delivery of Internet video to a TV set will grow nearly six-fold in the next five years, from approximately $1 billion in 2009 to $5.7 billion in 2014.

Colin Dixon, TDG senior partner, says that in 2009, pay-per-view services will account for 96 percent of global Over-the-Top (OTT) revenue, leaving subscription revenue with only 4 percent of the revenue mix. By 2014, however, annual OTT subscription revenue will have grown 50-fold and account for 31 percent of global revenue.

Dixon points to current hardware trends as fueling this growth, specifically the ongoing shift to broadband-enabled TVs and the rapid diffusion of ancillary web-enabled platforms such as game consoles, Blu-ray players, and hybrid set-top boxes.

Widespread penetration of such platforms will set the stage for a rapid uptake of Internet-to-TV video services, both pay-per-view and subscription-based.

As these platforms more widely diffuse and consumers become more comfortable with using Internet-based TV services, the market will be primed for the arrival of full-fledged PayTV replacement services.

Subsequently, TDG expects major OTT service announcements in virtually all global regions in 2010 and 2011, both in terms of stand-alone OTT and hybrid PayTV/OTT TV services, both of which will help fuel growth in OTT subscription revenue to $1.8 billion worldwide by 2014.

At that time, North America will account for the vast majority of global OTT subscription revenue ($830 million) followed by Asia ($490 million), and Europe ($407 million). Other global regions will collectively account for only $60 million of this total.

The owners of video content are determined to gain increased profits from offering direct-to-consumer services -- essentially by-passing their cable TV and IPTV distribution channel partners. As an example, ZillionTV -- the Internet TV startup backed by Hollywood's biggest movie studios -- is following in Hulu's footsteps and has stated its intent to now pursue consumers directly.

Furthermore, consumer electronics companies, that manufacture flat screen TVs, will continue to incorporate new features that are intended to remove the need for hybrid set-top boxes -- we should learn more about this trend at the upcoming CES in January.

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