• by Jack Loechner , Staff Writer @mp_research, April 19, 2006

According to a new forecast from IDC, Internet video services will generate over $1.7 billion in revenues by 2010, an increase of more than $1.5 billion from 2005 totals. Internet video services are on the brink of becoming a mainstream phenomenon in the United States. Much of this growth will be fueled by a surge in the amount of premium content made available online.

The market for Internet video services began its dramatic acceleration in 2005, as content owners started to experiment with digital distribution as a way to complement and enhance their existing business models and to stem illegal P2P file sharing and piracy. In particular, the television networks' decision to offer episodes from new shows as well as old sparked significant interest in Internet video.

According to Josh Martin, associate research analyst in IDC's Consumer Markets: Video, "The Internet video market has a huge upside. With that upside, however, comes the risk to content owners of cannibalizing existing revenue streams."

Key drivers for the adoption of Internet video include the expansion of premium content offerings online and the emergence of home networking solutions that allow consumers to view Internet content more easily on their televisions.

IDC expects that content owners will migrate toward three basic service types:

• Advertising-based services will remain the dominant type of Internet video service.
• A la carte services, buoyed by consumer familiarity with iTunes, will grow dramatically over the next 2-3 years.
• Subscription-based services will experience steady growth throughout the forecast period, enhanced somewhat by the emergence of home networking solutions.

To sustain the momentum gathered in 2005 and maximize opportunities for success, content owners and service providers will need to overcome several

• important problems
• licensing issues
• inadequate video search
• competitive challenges
• and how to move content beyond the PC

The complete release may be found here, or the report is available for purchase here.