Amazon, Apple, Microsoft, and Wal-Mart are hurtling toward a dead end, according to a new report from Forrester Research, which says the video download market will peak this year with $279 million in revenue, up from $98 million last year.
The research firm has found that only 9% of adults online have ever paid to download a movie or TV show, and that these consumers are "niche media junkies" who "do not represent the vanguard of a rush by mainstream consumers."
"The paid video download market in its current evolutionary state will soon become extinct, despite the fast growth and the millions being spent today," predicted Forrester analyst James McQuivey. "Television and cable networks will shift the bulk of paid downloading to ad-supported streams where they have control of ads and effective audience measurement. The movie studios, whose content only makes up a fraction of today's paid downloads, will put their weight behind subscription models that imitate premium cable channel services."
The moribund download market, according to Forrester, will force Apple to open up Apple TV to the rabble from YouTube and to embrace ad-supported content, just like the Internet-friendly set-top boxes deployed by Comcast and Time Warner.
Paid video download companies CinemaNow and Movielink will shift to providing satellite and telco service providers with video-on-demand content, the study predicts.
Furthermore, the study says the streaming of ad-supported TV shows will surpass DVR use by the end of 2008, much to the delight of advertisers, who have long feared death by commercial-skipping DVR.
The key for media executives, said McQuivey, is "to make video downloading ad-supported and geek-free."