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IDATE has released its report “Online Video: Uses, Markets, delivery technologies/CDN” which studies both the online consumer and video delivery market. “We expect the worldwide online video market to grow at an average rate of 35 per cent per year between 2010 and 2015 to reach €21.7 billion in 2015, some six per cent of the total video market. The total CDN market should reach €4.7 billion with a CAGR of 28 per cent”, says Vincent Bonneau, IDATE’s Internet lead analyst. “[the] Video CDN market will develop even faster with €2.4 billion at 33 per cent, close to online video rates.”
The consumer online video market
IDATE estimates the world consumer online video market at €4.7 billion in 2010. We estimate that 48 per cent of the world online market derives from advertising revenues and 52 per cent from pay-revenues, due to the peculiar structure of the USA market with strong sell-through on-demand revenues coming from Apple and Netflix, and to a lesser extent paid TV channels (especially from sport leagues). In most of other territories, the bulk of revenues originate from advertising.
Key online video services
The consumer online video services market can be broken down into five main segments, which differ in terms of content length, content quality (premium and therefore blockbuster/popular shows versus long tail), place in the media chronology and business models (free versus paid versus bundles):
• Free short clips services
• Streaming platforms (mostly illegal content coming from Megavideo)
• Catch-up TV services (rerun but fresh content, only available for free for a short period of time)
• Premium VoD offers (paid services on pay per view basis or subscription basis)
• Live streaming services (all live video, especially sports, including also illegal contents).
The lines are less and less clear between the different providers of those services, as they tend to offer all services. The largest remaining differentiation is therefore the business model and to a lesser extent the quality of the content.
Online video is becoming mainstream
In developed countries, more than 80 per cent of Internet users are watching audiovisual content via the Web. Short clips, such as provided by YouTube or DailyMotion, are the favourite online videos, with 78 per cent of broadband Internet users watching them. Other popular short clip video services come from specialists (AlloCiné) or more recently from Facebook, as social networking is spreading on all Web services. Catch-up TV (coming from Hulu and from all popular TV channels such the BBC iPlayer) and streaming platforms such as Megavideo, and live streaming are also fairly used. TV series consumption is indeed growing fast thanks to streaming platforms (very high intensity per user) and catch-up TV services.
The availability of streaming video services negatively impacts the use of P2P services. Other video services are still niche, as live is only emerging around dedicated platforms (Justin.tv) or for sport events around traditional broadcasters online video services, but often with a low quality. Premium VoD is developing, but is only being used online by a few users, even for Apple’s iTunes (most of VoD consumption being on managed services), except for the skyrocketing Netflix, whose future remains unclear. Adoption of online video remains higher among young people, but Pay-VoD is heavily used by middle-aged people. Unlike TV, Online video is often watched alone, except for pay-premium VoD which is mainly family entertainment.
All the same, the bulk of the total time spent watching video is spent on TV. Consumers accept the trade-off between free content/lower quality and paid content/higher quality, which is currently reflected by the lower adoption of paid services (except for services relying on bundles as has been the case with Netflix or, more recently, HBO). A lot of users are still flocking to free content (legal or illegal), raising therefore questions around the business models. Multi-tasking is also an issue to be addressed in order to monetise online audience: people watching online videos surf on the Web or on Facebook at the same time, chat, or even watch TV.
Revenue models of consumer online video services
Online video benefits from traditional Web advertising formats, namely display, sponsoring and search marketing. Inserting video or non-video advertising inside the video programmes increases its impact and encourages the circulation of programmes. Pre-roll video ads are the most commonly used formats, but overlays, tickers and companion ads are also widely used. A key trend is to let the user personalise the ads he prefers to be offered.
Implementing cost-per-click tariffs rather than cost-per-thousand is key for the adoption of online video advertising by advertisers.
Pay-revenue models are moving from pay-per-view patterns to flat-fee subscriptions, such as used by subscription video on demand services.
Services tend to combine the free and pay models into freemium services, where a subscription gives access to more recent content, higher quality and portability between terminals.
However, a significant share of online video consumption, bundled with other services, will not generate specific revenues: streaming services marketing their store and share offers (Megavideo); online free add-on versions of pay-TV channels (ESPN3, HBO Go); premium programming bundled with telcos triple-play services.