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Summary:

Forrester released a cranky-toned report today describing paid video downloads as a “dead end” and a “flightless bird,” one that quickly snowballed into blanket statements that all video downloads are dead. But the overstatements that follow in its wake are in keeping with the dramatic report […]

Forrester released a cranky-toned report today describing paid video downloads as a “dead end” and a “flightless bird,” one that quickly snowballed into blanket statements that all video downloads are dead. But the overstatements that follow in its wake are in keeping with the dramatic report (first mentioned here in our morning news roundup).

Sorry to disappoint, but only 9% of online adults [in North America] have ever paid to download a movie or TV show, whether for keeps or as a rental. And the facts about downloaders suggest that they’re not the leaders in a mass defection from other media; instead, they are a group of video junkies who like their media in large quantities through any convenient channel. [Forrester]

What the report, written by Forrester analyst James L. McQuivey, doesn’t provide is a good description of why the barriers preventing paid downloads could be lifted for ad-supported downloads and streams. The key problems listed — disabled sharing, disabled playing on a television, lack of availability of top-shelf material, uptake only by “affluent geeks” — are not changed with the switch of a business model.

Forrester predicts that the paid download market will rise from $98 million in 2006 to $279 million this year, with average yearly spending going up from $14 to $25. Then the “dead end” kicks in, when mainstream users fail to catch on.

McQuivey estimates ad-supported downloads are the future — if not that, “the internet-friendly set-top box,” or paid subscriptions. All these things are natural progressions of early paid download offerings — as we’ve seen with the baby steps made by Amazon Unbox tying up with TiVo, or the growing phenomenon of networks releasing ad-supported streamed primetime shows, or the closed first-generation Apple TV.

The report predicts ABC will be the first network to offer ad-supported downloads. Then in the next breath it forecasts streaming of TV shows to eclipse DVR use. You’ve got to presume they’re talking about ad-supported streaming making its way onto the living room television; otherwise we can apply Forrester’s arguments right back at them: “The mainstream viewer won’t appreciate the value of a download until it can be viewed on the TV screen,” they say.

This is a heavy helping of different and divergent alternatives — why is it that paid downloads are the only ones being dismissed?

And why is advertising going to bring the TV any closer to the internet? The best answer I can find in the report is that the “secure portability” of ad-supported downloads “will embolden advertisers and producers to untether their content from live streaming.” Hmm.

OK, I’ll give you this — current paid download offerings are pretty terrible, especially for a Mac user like me. And free? Free is great. However, just because paid downloads aren’t perfect so far doesn’t mean they can’t change. But hey, I’m just one of those so-called “video junkies” and “affluent geeks.”

  1. Agreed… this isn’t a well-thought through piece of analysis imho. There’s a core minority of early techie adopters who will be into paid downloads, poor people. But there’s a massive population of ppl already out there downloading the stuff for free through bittorrent and edonkey and usenet and off the vid streaming sites and ppmate and etc etc. With no drm and no restrictions and in great quality. And they’re working out ways to get it on their tv sets (xbmc, apple tv, s-video outputs, burn to dvd, netgear entertainment centre, etc etc) or just watching it on their nice flatscreen monitors. That’s the future: a tech-adept audience grabbing what they like when they like and doing whatever they like with it.

    If anything’s threatening the paid model, it’s that: the piracy user experience is so far ahead of what you can get for $$$ (and hey, if you’re outside the us, forget paying for stuff, cos it aint there) that its a no brainer for most people. and its crossed to the mainstream now. its not just geeks doing this. everyone is getting their tv this way and movies are next. look at how many articles wired have published recently about downloading tv. look at that how-to on crunchgear about piracy yesterday.

    unless paid downloads = no drm downloads, day and date with the tv or film premiere, this is only gonna grow and grow. you can’t compete with free with paid + restrictions + no easy way to watch.

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  2. thanks

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  3. Heddy,

    You have to understand that the tech-adept group you describe is very ,very small, perceptions in the blogosphere notwithstanding. Very few people know what DRM is or what it implies. Similarly, the number of people who pirate movies and TV shows is also very small, but at least IMO, indicates that a potential sell-through market exists provided that content can be priced (and distributed) cheaply enough.

    Liz,

    Advertising’s effect on TV/web convergence may be more powerful than you suspect. Obviously the broadcast upfronts are underway this week, and it’s clear that the ad agencies are not happy with the state of TV advertising -
    Nielsen is going to be releasing minute-by-minute commercial ratings (which will certainly not help the networks), program ratings this spring are off significantly almost across the board for as yet unknown reasons, while both DVR penetration estimates and forecasts have been increased.

    Naturally, the appearance of a perfect storm of this sort has been exaggerated by a concerted agency PR effort timed to coincide with the upfronts, but there are still some substantive problems here.

    The big agencies, ready or not, want to go to the web with some of their spend, and the broadcast networks need to meet them there. IMO the agencies–not consumers–will drive the networks’ activity on the web. Unfortunately for the networks, the current pre/mid roll ad-supported streaming model is not exactly profitable due to bandwidth costs (and similarly, what are essentially fixed marginal distribution costs). A P2P structure like Joost or, as you say, ad-supported downloads, could satisfy both the agencies and the networks, if they were to catch on.

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  4. David — You should have helped write the Forrester report! If agencies can persuade the networks and studios to let content out, we’re all happy.

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  5. the number of people who pirate movies and TV shows is also very small

    I’d take issue with that. The number of people who pirate tv programs on a weekly basis far exceeds the number of Apple TV units that the company wish to sell this year. It’s way into the millions. And those people don’t care about ‘sell-through’ or adverts. They care about getting the content for nothing as soon as it’s available and in good quality. Whatever the networks do, it’s going to have to be something very impressive to rival the speed with which you can grab Lost on bittorrent – and that’s download speed AND time after transmission.

    And you don’t answer the pc to tv problem. Why download Lost, with or without ads, if you can only watch it on your pc? Most Lost-watchers don’t want that. They want the lean-back sofa experience. It’s interesting that you believe it’s the ad spenders pushing the networks to the web, but the networks have already been investing heavily in ways to get the content out there. And what’s the difference between an ad-supported download and the ad-supported streaming they’re already doing?

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  6. Apple TV is not even a blip on the radar screen for the overwhelming majority of consumers, who for the most part have no idea why they’d want or need it or a similar product. I completely agree that the PC to TV hurdle is a big obstacle… It seems to me that if anyone can do it, it’s Apple, but the current product might have too many restrictions.

    IMO BitTorrent is too complicated (and too much work) for most consumers right now. I agree that BitTorrent users are an active group, but awareness of video file sharing among the general public (and even among so-called early adopters)is very limited according to the studies I’ve read.

    Sorry, didn’t mean to imply that the agencies alone are pushing the networks to put their content out there because there are a lot of other factors, but rather that at least IMO they are starting to become a driver because of the pressures on the linear TV ad model.

    The agencies practically own the networks for obvious reasons, and I think that the networks will do anything they can, including accelerate moves to new models and/or platforms, to ensure that they retain a large portion of the spend. In other words, it’s follow the money. Of course the web is a very different ad environment, but that’s fodder for another discussion altogether!

    Ad-supported downloading is basically just the downloading of a video with ads either embedded in the content or dynamically inserted/generated by the video player application (e.g. Adobe player or really any other if they are updated to allow it).

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  7. [...] Liz Gannes at NewTeeVee takes issue with this, however admitting that she may be one of the affluent geeks currently even downloading paid videos. [...]

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