Rental to Lead the Over-the-Top Online Video Pay Market

NEW YORK — As new solutions for bringing online video to the TV flourish, ABI Research believes that rental, download to own and subscription models will all see significant traction. However, the greatest number of downloads will be through rental, in particular for online movie rentals. Overall online pay video streams for over-the-top video downloads will grow from 215 million in 2008 to over 2.4 billion in 2012, with rentals accounting for approximately half of these.

“The opening up of rental for video on iTunes is not surprising, given that is how most consumers looking for legal paid movie downloads will choose to acquire them,” says research director Michael Wolf. “Distribution offerings for movies that are in attractive release windows and that offer easy viewing on a TV or portable screen will see the greatest success.”

However, challenges still remain for this market, particularly competition from legacy VOD services as well as unattractive ownership and rental terms offered by the studios. Cable and IPTV service providers are offering impressive VOD libraries to consumers through their traditional pay video services, and increasingly video service providers such as Comcast are expanding into over-the-top streaming. Additionally, over-the-top rental terms are unattractive as the studios dictate the same rental terms to all distributors, even iTunes.

“Studios are locked into the same 24-hour ‘once-started’ viewing window and similar pricing for all online rental partners,” said Wolf. “We believe that over time they will begin to offer greater flexibility, in particular as DVD and other physical media continue to mature and new consumer Internet-to-TV hardware expands their audience of consumers.”

ABI Research’s recent report, “Broadband Video and Internet TV” examines every aspect of the online video market from consumer adoption of Internet video to the back-end enabling service providers in the BBV ASP, CDN and ad-network markets. It also explores the different business models for online video such as ad-supported (forecasts of ad revenues, ad-types and online ad views), and pay models (subscription, download-to-own and online rental/VOD).