The UK television industry expects both pay and advertising revenues from online video services to quadruple by 2020, according to new research findings from media management company Red Bee Media.

The research, which surveyed executives from across the UK television industry on their predictions for business models and revenue streams in 2020, found that more than three quarters of participants (78 per cent) are positive about the financial outlook for the industry, expecting growth both in traditional TV revenues and new revenue streams too, such as online services that capitalise on subscription payments and new commercial opportunities. However, incumbent broadcasters and platforms are likely to face growing competition for this revenue, with internet and technology companies expected to be the biggest challengers.

The survey findings are the latest instalment in Red Bee Media’s Tomorrow Calling programme which aims to build a picture of the media world in 2020, its technological possibilities and market dynamics through a series of think tanks, quantitative and qualitative research, one-to-one interviews, live panel debates and white papers.

Among the survey’s key findings:

• An optimistic outlook; fast growing revenues – The UK television industry expects online video services to fuel significant industry growth in the coming years with annual revenue from pay online TV services predicted to quadruple by 2020.
• Industry participants also predict that annual revenue from online advertising will quadruple by 2020, increasing by 320 per cent from 2010
• Non-traditional revenue sources are expected to become increasingly significant with 58 per cent of respondents predicting that product placement and ad-funded programming will become important income streams.
• Major competition – However, this growth will come at a price. As the UK’s digital infrastructure matures and as broadband connectivity spreads, industry participants believe that the battle for industry revenues will intensify, with increased competition from the technology industry as major internet businesses and device manufacturers ramp up their investment in the market.
• Around two thirds of respondents (64 per cent) believe that the growing influence of digital gatekeepers such as Apple, Google, Amazon and Facebook is the most important challenge facing their company through to 2020.
• The importance of new platforms and IP-enabled devices will also be a key factor; industry respondents expect nearly a quarter (23 per cent) of adults to watch video through games consoles by 2020, up from 12 per cent in 2010.
• Content ‘goldrush’; but more competition for premium sports and film rights – New players are predicted to make a significant impact on the industry with traditional broadcasters going head-to-head with internet and technology companies for content rights. Three quarters (72 per cent) of respondents believe that competition for premium content will intensify dramatically by 2020, as more companies seek to acquire rights.
• 57 per cent predict a major technology company such as Google, Apple or Samsung, will acquire a package of live rights to Premier League football.
• Around half of respondents (46 per cent) expect YouTube to invest over £100 million on commissioning original video in the UK by 2020.
• 59 per cent of respondents expect Sky to spend more on TV production in the UK than ITV.

Bill Patrizio, CEO of Red Bee Media, said that from talking to the industry, it was clear that technology and internet businesses were fast becoming significant players. “The question we need to ask ourselves is whether the innovations brought by these new entrants are going to sustain or disrupt our industry in the years to come. Will the internet be the industry’s friend or foe? And what role will regulatory bodies play in determining the impact and pace of change? If the last ten years have seen the convergence of broadcasting with broadband, it’s likely that the remainder of the coming decade will see a collision and competition between business models driven by consumer demand and expectation and changing patterns of media consumption. Media companies will have to fight hard and innovate in a fast changing, technologically driven landscape if they are to make the most of this flourishing market”.

The research findings were revealed at the Media Guardian Changing Media Summit 2012.

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