Forrester: Paid video download market is peaking

Hey, Forrester: we haven’t heard from you in a while. Man, hope you got over that whole “iTunes sales are collapsing” thing—that “doom-and-gloom” act was rough. What have you been up to lately?

An all-star cast of players premiered online video download services in early 2007. The question of who will dominate is moot since there is no long-term market to master. Sure, a small market is coming: Current downloaders are media addicts who will spend aggressively in 2007, driving revenues up to $279 million from just $98 million last year. The paid download market, however, is ultimately a dead end. [Emphasis added]

Nooooooooooooooooo. Okay, since the full report costs $775, I haven’t read the whole thing (I wonder if the market for paid research paper downloads is also a dead end), so I’m going based on the excerpts I’ve seen here and there. The thrust of the argument seems to be that the paid-download market will peak this year as the content owners (the movie and television industry) start to back ad-supported models that mimic cable subscriptions.

There are, however, some gems from the report’s press release that I’d love to share with you. Read on.

Set-top boxes give in to Internet video. Apple will have to rethink Apple TV, shifting it from a closed pay-per-view system to an ad-supported, broadband service provider model that puts YouTube videos as well as ABC.com TV shows directly on the TV. At the same time, Internet-friendly set-top boxes from Cisco and Motorola will give Comcast and Time Warner a way to offer competing Internet-based, ad-supported content.

So my choices are to pay a monthly fee that includes a box which lets me watch ad-supported content, or just buy a box and then pay for just the content I want to watch?

Television networks allow ad-supported downloads of prime-time TV shows. New technology such as the recently announced Adobe Media Player will allow consumers to download video for playback without losing the ads that were sold with the video.

Well, thank god we’ll finally be able to get our content without losing those ads. Those are really a vital part of the whole watching experience.

Paid video download pioneers CinemaNow and Movielink shift their expertise to partner with satellite and telco service providers provide video-on-demand (VOD) content without a huge investment in VOD infrastructure.

I tried—and failed—to suppress a giggling fit over the idea of CinemaNow, Movielink and “expertise” in the same sentence. These are the same services that have historically ignored the Mac market, and generally treated consumers like they should feel lucky just to have the possibility of watching crappy video online. Pardon me if I don’t want to be part of any club that would have them as members.

It’s impossible to dispute that the web has opened up a whole new way of consuming video content, so I’ll throw it out to you, readers: do you prefer to watch ad-supported content for free, or pay for ad-free content? Or—and this is crazy, I know—would you like to have your choice of how to consume content? Personally, I’d like to get it ad-free for nothing, but I guess that’s not an option, huh?

Seriously, though, I think the ad-supported model is on its way down the tubes, if you will. Arguing that this is how it’s always been and thus, how it ever shall be doesn’t really hold water. You want my prediction? Ad-supported models will hit the web for streaming, certainly, but the paid-download market, with iTunes at its head, will keep ticking along nicely. What do you think?