Forrester Study States Paid Video Downloads Have No Future

A Reuters headline published yesterday read, “Study sees no future in selling video downloads.” The gist of the corresponding article? That demand for paid-for video downloads - the files iTunes users are able to procure from Apple’s digital storefront, for example – will taper off and only advertisement-supported content will remain standing.

The study was conducted by the researchers over at Forrester, an oft-cited source for technology-related data in just about all media industries. (Print, television, radio, and online.)

Though I’m we’ll aware that numbers do not lie, I cannot help but question Forrester Research’s assessment. The firm does establish that the paid video download market is expanding greatly at the moment, and that they expect it to “almost triple” last year’s final estimate. (In 2006, Forrester claims the market took in $98 million. This year they predict the final number will reach somewhere around $279 million.)

But according to analyst James McQuivey, “iTunes is just a temporary flash,” and that consumers will more or less dump the paid-for model for a free one the first chance they get, even if it means wading through advertisements - which will presumably be much more targeted to the tastes to every outlet (Television set, computer. Doing so for every viewer could be…well, that’s pretty much impossible.)

While I agree that many will choose free over not-free, there’ll be enough demand for advertisement-less programming to ensure that businesses built on such offerings continue to remain profitable. One needs only to look at the vibrant market for DVD box sets of television series to see that that indeed will be the case.

There will certainly be a great lull in the purchase-and-download-to-own feature-length movie business. Anyone can see that the numbers for the takers for such a model are few and far between. But movie rentals made via Internet channels will be monstrous as soon as a Netflix-type model is created and arrives on television sets with an attractive virtual marketplace complete with a tiered payment system.

Set top boxes will of course been necessary early on to interact well with such a marketplace, but I suspect cable card-like hardware is all that will be needed for most end users to gain access to such venues in several years’ time. Do not be terribly surprised to see Apple, Microsoft, Netflix, and the various satellite and cable television providers contend with one another shortly for space in the yet-undefined industry, utilizing a variety of hardware solutions to entice users to their respective sides.

Paid-for downloads will not disappear, now or ever. What we will see is slow but steady cost cutting taking place and the establishment of business models consumers have long yearned for but never gotten. Forrester is certainly commendable for the thorough research they do, but sometimes those closely involved with the processing of data need outside minds to exercise some logic in the midst of mountains of figures and facts.