Already in the first month of 2008, several companies have announced plans to launch or expand online video rental services, including Apple, Netflix, and others. According to new research released by ABI Research, online rental videos will lead the way in terms of the paid online video market. Specifically, paid video streams will grow from $215 million estimated revenue this year, to a market of $2.4 billion in 2012. Online video rental services are expected to reap 50% of this revenue.
"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, as mentioned in the announcement from ABI, significant challenges still remain for the paid online video market. Competition from video on demand (VOD) services as well as the fact that movie studios are attaching unattractive business terms to their content are two challenges that will have to be overcome for this prediction to become real. Cable IPTV services already offer quite impressive VOD catalogs to consumers and some, like Comcast, are expanding into over-the-top video streaming.
"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.”