The online TV services of the four major US television networks (ABC, CBS, NBC and Fox) together with Hulu, the joint venture between NBC Universal, News Corporation and Disney, accounted for a combined 53% of the ad-supported online TV market in the US, according to a new report from UK research firm Screen Digest.
The ad-supported US online TV market generated revenues of US$ 448mn in 2008, according to the report, which adds that the remaining share of revenues was made up of the online video services of major sports leagues, video services from traditional online portals, and direct services from other major channel groups and content owners. Screen Digest goes on to state that the combined dominance of the leading broadcaster-supported platforms will drive the total ad-supported model for the distribution of online entertainment programming, news, sports and events in the US to more than US$ 1.45bn in revenues by 2013.
Meanwhile, third-party platforms such as YouTube, Joost and other portals - which have no direct affiliation with major rights holders, nor access to premium content rights - will struggle to aggregate ad-supported movies and TV shows, according to the report. The Hollywood studios and major rights holds are expected to continue to limit such deals, instead preferring to build their own syndicated ad-supported online video services, such as Crackle, developed by Sony Pictures, and the CBS Audience Network: this trend is expected to gather increasing momentum, according to Screen Digest.
As a result, third-party ad-supported video platforms may have to either diversify into new forms of their own original programming, exit the content aggregation business and offer technology and advertising solutions to the content-owners’ and broadcasters’ own services, or "settle on the low-margin business of becoming affiliates of the player-platforms distributed by the content rights holders themselves".
“With better targeting and increased ad inventory, online TV services could be generating per-viewer revenues comparable to an average TV broadcast viewing in as little as three years," said Arash Amel, author of the report. "However, based on the current online ad strategies implemented, it will account for 2.2 percent of all US TV advertising revenue by 2013, but definitely won’t be generating enough to offset the US$ 2bn we expect total US TV advertising to have declined by during in that period."
"The challenge right now is to maximise the ad-supported online video business model, see how new forms of short form and traditional long form content can drive growth, and explore more advanced methods of video advertising while there are still revenues from the traditional business to support the transition to multiplatform," added Mr. Amel. "In this regard, the next few years will be critical.”
The report goes on to state that free online TV will challenge the paid model of content download services such as Apple’s iTunes, as well as pay-per-view and subscription online sports video offerings, which will require innovation in order to remain competitive. However, Screen Digest forecasts that the paid market, driven by the respective hardware ecosystems of the leading service providers, and high value sports events, will remain robust – growing by 67% to reach US$ 1.33bn by 2013.
