Movie Downloads Get a Downgrade

Digital video is a nascent industry, but it’s rare to find someone betting against its future growth. So rare that when it happens, people tend to simply overlook it. When London-based research firm Screen Digest projected earlier this week that movie downloads in the United States and Western Europe would be worth $1.3 billion by 2011, for example, it drew headlines like “Downloads on the Rise,” “Sales of Movie Downloads to Soar,” and “Movie Downloads Set for Strong Growth.” But the truth is, the firm halved its growth forecast from the year before.

Sure, $1.3 billion is more than what the market is worth today, so that’s growth. But the language in the press release accompanying the report signaled a different, more pessimistic, story, so we dug a little deeper.

“[W]e have re-evaluated our 2006 forecasts of the digital movie market value in response to consumer reaction to existing services,” wrote analyst Arash Amel. “[T]he idea that people will en masse watch a two or three-hour movie on the PC just isn’t realistic.”

After corresponding with Screen Digest over the course of the week (with delays due to the difference between our time zones), Amel and others told us that the report was actually a downgrade on their forecast from last year. Whereas at the time they saw digital movie sales bringing in $2.5 billion to $3 billion by 2010 (unfortunately they could not produce a digital copy of last year’s report, but two analysts confirmed this), they’re now looking for sales of just $1.3 billion by 2011.

“We’ve almost halved our predictions because a) service propositions outside of Apple and Microsoft have failed to materialize and b) the Studios have followed fragmented strategies,” Amel wrote us in an email.

Dan Cryan, also a Screen Digest broadband media analyst and a colleague of Amel’s, pointed out in a phone interview that: “People pay for content on devices but not on PCs. We were expecting more studios to get behind hardware-based platforms,” he said. “Specifically iTunes, but also XBox.”

He added, “Until we start seeing a viable way of connecting TVs to the Internet or TVs to PCs, we’re quite a ways away from seeing people spending money on content in large numbers.”