• by Gavin O'Malley  @mp_gavin, February 23, 2007

Despite all the hype over ad-supported video models, pay-to-play is poised to dominate the digital video market over the long term.

That forecast comes in a new report from Adams Media Research, which finds that annual consumer spending on Internet downloads of movies and TV shows will top $4 billion in 2011--up from just $111 million last year--while ad spending on Internet video streams to PCs and TVs will approach a mere $1.7 billion, from $409 million last year.

The research group's analysis points to a period of experimentation from now through 2009, during which the ad-supported model will dominate. But as significant numbers of homes connect their TVs to the Internet, consumer spending on downloaded movies and TV shows should expand rapidly and exceed ad spending substantially by 2011, Adams Media finds.

"The Internet is going to revolutionize the distribution of video," Adams Media Research President Tom Adams said in the report.

The growth of pay-to-play will be fueled by the introduction of devices such as Apple TV, a $299 set-top-box that converts videos downloaded online into signals that can be played on high-definition TVs. It is expected to ship later this month.

The market research firm forecasts that sales of video downloads will total $472 million in 2007, $1.2 billion in 2008, $2 billion in 2009, $3.1 billion in 2010, then hit $4.1 billion in 2011.