HD Video to Be Worth $2.2B by 2012

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.

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