According to a study by Adams Media Research, it will be the download-to-own video model that will be the largest revenue generator in the years ahead, not ad-supported video.
The report added that by 2011, the digital video subscription model without ads will be by far the most lucrative for the industry.
The research company also said that by 2011 consumer spending on video downloads will reach about $4.1 billion a year on TV programs and films, in comparison to only $111 million spent in 2006. With the ad-model, revenue will reach only about $1.7 billion annually, in contrast to last year's $409 million.
Concerning the download-to-own model, Tom Adams, president and senior analyst at AMR said “It’s an attractive model for the supplier to sell it for $2 per episode...The whole industry is pushing the download-to-own model. The real issue becomes the connection to the TV. That’s where we’re going to really unlock this market.”
Apple (AAPL) TV is positioned to be a main driver of migrating digital video from the PC to television, with its set-top box.
In spite of its conviction concerning the download-to-own model winning out in a big way, AMR still said that for the next couple of years the ad-model will predominate the online video space. They think after 2009 televisions connected to the Internet will scale to the place of exceeding the ad-model.
AMR concluded that it will still be a time of experimentation and there will be some ups and downs before things really take off.
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