How viable are digital downloads?

In a s tory from Variety, it looks like the market for video downloads will "triple in size to $279 million this year," but according to a study from Forrester Research, the market for this content may not get much bigger.

The hope is that Wal-Mart.com and Apple TV will help video downloads reach critical mass, but it seems that only a "small portion of people already downloading movies and TV shows will likely increase their spending as a result, but that most people simply aren't interested."

Forrester has based their study "on consumer surveys and exec interviews, projected that the number of people buying digital copies of movies or TV shows will only grow from 7 million to 11 million."

With all the DVDs on the market, as well as DVRs, it appears that downloading movies isn't something consumers see the "value" in.

This doesn't mean that downloading is going to go away. Forrester predicts "that free, ad-supported video-on-demand and subscription-based digital movie rentals will dominate."

To make this point, the study talks about how "networks are making deals with numerous Web sites and cable operators to offer TV shows free on-demand with commercials a day after they air. Examples include CBS' interactive audience network and the NBC-News Corp. joint venture, and ABC's recent deal with Cox."

Presently, the studios are looking at paid downloads so as to not upset their "DVD sell-through" business. However, as this market continues to mature, studios are finding that "paid digital downloads don't come close to making up the difference." This might cause them to rethink their "digital business models."

The most likely scenario is one which sees consumers getting their movies in a subscription type way. Basically, they "pay a flat monthly fee and get any movie on-demand."

Forrester also predicts that "lack of growth in permanent downloads will likely spell trouble for the fast-growing number of online videostores, from BitTorrent to Movielink to Amazon.com. Even in the currently small market, Apple's iTunes, which has thus far sold more than 2 million movies and 50 million TV shows, is bigger than all its competitors combined."

Evan Jacobs