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Web video quality is growing by leaps and bounds these days, but can a higher quality experience draw enough income to pay for its own costs? Quite possibly, because HD revenues are about to jump, according to a new report from IDC that was commissioned by […]

Web video quality is growing by leaps and bounds these days, but can a higher quality experience draw enough income to pay for its own costs? Quite possibly, because HD revenues are about to jump, according to a new report from IDC that was commissioned by Akamai. Revenues from U.S. HD streams and downloads will grow 189 percent annually over the next four years to $2.2 billion in 2012, up from $32 million in 2008, said the white paper.

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IDC sees HD video as a premium service that users will pay for, and thus expects content sales to comprise the majority of revenue: $1.6 billion in paid content alongside $0.6 billion for advertising in 2012. (IDC considers HD to be 720p at a 1.5 Mbps bitrate.)

In 2008, IDC found online video (both HD and standard definition) revenue from sales to be $1.23 billion and from advertising to be $900 million. HD video accounted for just more than 1 percent of combined online video revenues last year.

While HD accounted for less than 2 percent of online video consumption in 2008, IDC thinks that figure will grow to 17 percent by 2012. Publishers told IDC that when HD is available, some 20 percent of their audience chooses to receive it — and that number shot up to 43 percent for a recent live event. HD also increases viewing duration, from 9 to 50 percent in various examples.

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An IDC survey found 37 percent of U.S. online video users (a.k.a. 18 percent of U.S. Internet users) are already watching HD video online. And 82 percent of online video users told IDC that the sharpness and resolution of online videos is important to them (though even more said smooth play was important to them). HD will be increasingly important as online video moves to the living room; 35 percent of those surveyed said they want to move their online video to their TVs.

Factors like better broadband penetration and the implementation of variable bitrate streaming — which enables smooth video play while a watcher’s bandwidth fluctuates — will help the spread of HD; however, the confusing variety of formats, codecs, and DRM may depress growth, IDC said.

  1. The numbers and reasoning behind these projections makes no sense.

    Simply because users “want” something does not mean they will spend the money to adopt it. It’s the same idea that Flash will be adopted in the living room just because consumers “want” to see web video on their TV, but the question is whether or not they are willing to pay for the content.

    The problem here is not whether or not consumers want better quality video, they all do, they problem is that content owners don’t provide most of their inventory in HD quality as they can’t monetize their content.

    For all the talk of quality, why isn’t every content owner encoding their content at 1.5Mbps today? Because they can’t afford the bandwidth bill. What I don’t see IDC saying is how that will be any different in 2012 since even years from now, most content owners still won’t have content people are willing to buy, no matter what quality it is in.

    The market size is going to jump from $32M to $2.2B in four years? That’s simply unrealistic. And how do the advertising revenue numbers tie into this? What does this mean?

    • In 2008, IDC found online video (both HD and standard definition) revenue from sales to be $1.23 billion and from advertising to be $900 million.

    What does advertising have to do with HD? Is this online video advertising revenue? And if so, how is it defined? If IDC is saying the online video advertising market was $900M last year, that’s almost double what eMarketer says it was, cutting their original projection from $1.4B to $505M for 2008. I don’t know what the size truly is, but there is a big gap in those numbers.

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    1. Hi Dan, I am not as skeptical as you are. Premium content availability and quality has improved drastically in the last six months alone. Given the flexibility and simplicity of accessing online content, HD shows and movies are simply a better option for many users. Monetization is certainly an issue but for the first time there is something worth paying for online.

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  2. [...] In May of 08′, IDC said that online video advertising will reach $3.8B by 2012. (source) But in April of 09′, said the same market size will be $600M by 2012. (source) [...]

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  3. [...] sports packages and movies. It also may just linger with high-definition content. IDC expects $1.6 billion in payments for HD content in 2012, compared to $0.6 billion for advertising-supported [...]

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