Report: Viewers Will Pay for Online Video

Despite all the optimism surrounding the potential for free, advertising-supported online video, some analysts see a far more lucrative market for selling video content online — one that will materialize this year despite the rocky economic picture.

According to a new report issued by Strategy Analytics, consumers may be far more willing to open their wallets to purchase Web video content, much as they do with music, than many once believed. The Boston-based research firm forecasts that worldwide consumer spending on online video content could reach $3.8 billion in 2009 despite the recession. That figure would exceed the $3.5 billion in online video ad revenue expected this year, the report says.

Indeed, even as Hulu and other premium ad-supported video sites surge in popularity, Strategy Analytics sees paid video growing faster than free video over the next several years, at a rate of 39 percent annually through 2012 vs. 37 percent for ad-supported video.

Perhaps surprisingly, the report actually credits the recession in helping fuel this trend. “The economic downturn and diminishing advertising budgets have increased the focus on consumer paid content on the Web in the last six months,” said Martin Olausson, Strategy Analytics’ director of digital media research.

Advertising budgets across the board have taken a major hit, slowing online video’s ad growth, said Olausson, who presented a Webinar on this subject late last week. At the same time, consumers have flocked to emerging stay-at-home entertainment options, such as Netflix WatchNow and Xbox Live Video Store, as well as various pay-per-view platforms offered by cable companies, Olausson said.

Nielsen Business Media