So Far, Short Form Rules

About five percent of North American users who watch video on the Internet, and polled by ABI Research, say they have rented or purchased a digital movie download, a lower overall number than indicate they have downloaded a movie free from a peer to peer sharing site. Movie downloads, both legal and illegal, remain the least watched genre of online video on the Internet, where short-form content such as sports and news clips is watched by nearly 7 in 10 of those that watch Internet video.

"The vast majority of those watching content online are watching short-form content such as news and sports clips," says ABI research director Michael Wolf. "Older users in particular watch primarily news and sports, while younger users are watching more entertainment content, including viral media provided by sites such as YouTube."

You probably aren't surprised by this finding. For starters, movie downloads are something of a nuisance at the moment. First of all, the whole catalog you might be interested in is never in one place. So there are search "costs," paid in your time. Second, there's still some hassle involved for downloading, depending on the actual bandwidth one has available. It isn't just the time it takes to download a movie, but the other stuff one can't, or doesn't want to do on a PC, while a download is in progress. A user's time, in other words, represents a real cost, even if it isn't a directly measurable financial cost. Finally, there are product substitutes, and many of them are arguably better substitutes, at least for the moment.

When ABI Research asked consumers why they chose not to watch movies downloaded or streamed from the Internet, the biggest reason was satisfaction with existing cable and satellite services as well as DVDs. About 48 percent of respondents indicated they would never purchase a movie online for download because they were satisfied with their current providers and the rental market. We do think that will change, with time, but the fact remains that there are lots of viewing niches even within the market for "movie viewing."

Most people will watch most movies once. Some users will watch some movies twice. Children will watch the same movie lots of times. So the market segment "movies my children really like" is better served by a prerecorded DVD with no usage restrictions. The market segment "relatively current release we only want to see once" is quite a different market, in terms of delivery mode. Downloading makes sense for the latter. It almost never makes sense for the former.

Downloading to a notebook PC by a user who has no other family members who will want to view the movie is a different value proposition than downloading of a movie when most of the family, or at least two members, want to watch it. PC viewing often is suitable for the former. PC viewing normally is objectionable in some ways in the latter case. And end uses tend to say they are much more likely to download content if they can view it on a TV.

"Despite the growing interest in the pay market for Internet-delivered video, perhaps the biggest remaining hurdle to widespread adoption is that the status quo usually gives consumers a vastly superior, and often less expensive experience than Internet-delivered content," says Wolf. "The industry needs to develop reasons and business models that increase overall consumer interest in Internet delivered video, including allowing for easy transfer and better viewing on the large screen."

No Doubt About It

Regular weekly usage of new media is growing at high double digit rates, while regular usage of legacy media is dropping, albeit only at single digit rates, with the exception of magazines, which are dropping at about a 12 percent rate. All of the growing formats have a network delivery or core communications element to them.

Percentage Growth of Regular Weekly Media
Medium Regular Weekly Usage
TiVo/Replay TV 88.1%
Satellite Radio 79.9%
IPOD/MP3 Player 72.1%
Blogs 63.2%
Picture/Video Phone 59.2%
Text Messaging 58.8%
PDA 14.0%
Traditional Media
Magazines -11.7%
Newspaper -7.1%
Radio -5.7%
TV -5.2%
Source: BIGresearch, December 2006

Mutliple Wars Raging

Scoff if you like about the ultimate business models that might develop around user generated video content, but the trend will intensify competitor triangulation in the coming market share wars that are ranging at multiple levels. The access battle has telcos and cablecos, plus specialized wireless and other players competing for "lines." The "services" battle is being waged between portals and between portals and the access providers.

In some respects the "access" providers will bundle and tweak their walled garden and possibly some Internet applications so they work better, experience-wise. The portal and app providers will seek to create interesting community interaction or portal content experiences so users can be enticed to use other features. The key here is that rich communications and entertainment will be primary forms of "bait" to entice users to show up and stick around. So far, the main battle has been between the major "access" providers. At some point, though, compeitition at the other layers (intra-portal; portal versus access; service versus app) will emerge.

Smaller developments, such as the user generated video trend, as shown here by analysts at The Yankee Group, are laying the foundations for the next phase of competition.

SME Business VoIP Uptick

SMEs seem, at least according to one projection by Infotech, to be getting the message on hosted and premises-based business phone services. Adoption rates are tracking large enterprise deployments pretty closely, after initially trailing. There's growing evidence that prices also are getting more interesting as well, in large part because premises-based systems are becoming more affordable, thanks to Asterisk and other open source platforms, as well as suppliers such as Samsung staking out new price point terrain.

WAN Will Be Driven by Video, Obviously

Until recently, global backbone traffic was driven by voice. Then email, Web browsing and peer to peer traffic became significant traffic contributors. Clearly, though, high definition and other television-based traffic will be the dominant driver of global bandwidth demand, argue researchers at Information Gatekeepers. By 2010, as much as 94 percent of global traffic will be HDTV or IPTV content, IGI predicts.

Late 2008 Consumer VoIP Mainstream

Telecom industry executives and analysts generally believe consumer VoIP will hit mainstream status by late 2008 or early 2009, according to stl. They also believe that sometime in 2010, voice revenue will represent 20 percent or less of wireline service provider revenue. Mobile operators will be in the same position by 2011. Some 90 percent of respondents say the global telecom industry is undergoing a fundamental structural change.

Lots of Niches

Google is rumored to be talking to France Telecom's Orange unit about a Google phone optimized to support Google search functions. In Romania, Zapp is targeting the SME space, especially frequent business travelers and expatriates, with a prepaid EVDO mobility service. The point is that Web and IP platforms, as well as open source and other Web 2.0 programming tools and concepts will enable creation of many new service niches. The Google phone might ultimately appeal to specific groups with high needs to conduct search operations when away from their PCs, sort of a new subset of the "BlackBerry" and "push email" user base.