Report: Online Video Revenues Will Hit $5.7B by 2014

Written by Ryan Lawler

Monday, September 14. 2009 at 04:35 PM EDT Post a comment

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A new research report from The Diffusion Group (TDG) estimates that over-the-top (OTT) video revenues will grow nearly sixfold over the next five years, from $1 billion in 2009 to $5.7 billion in 2014.

According to TDG's report entitled "Broadband-Enabled TV: Rise of the OTT Provider," the rapid increase in online video sales will mostly be driven by the proliferation of broadband-connected devices in the home.

By the end of 2009, TDG estimates that there will be nearly 127 million households with a broadband-enabled TV set. But that number is expected to more than double over the next five years, to more than 358 million households with a connected TV in 2014.

North America, which will have 54 million broadband-enabled TVs, will lead the world with a little less than half of all broadband-enabled TVs by the end of 2009, compared to 37 million in Europe and 22.5 million in Asia. But explosive growth in China and India should propel Asia to have the greatest number of broadband-enabled TVs by 2014, with 117 million, compared to 89.6 million in Europe and 87.4 million in North America.

While most TV sets and consumer electronics (CE) devices that consumers buy will soon be broadband-enabled, not everyone will take advantage of the online video features enabled by those devices. Currently, only about a third of households with broadband-enabled TVs watch Internet video in the living room.

However, that number is expected to increase as consumers become more comfortable with OTT services. TDG estimates that the number of OTT TV households will increase from 40.2 million in 2009 to 165.6 million in 2014.

With the number of households that are ready, willing, and able to purchase online video services increasing, so will revenues tied to those services. Pay-per-view will remain the strongest segment in the OTT video market, rising from $970 million in 2009 to almost $4 billion in 2014.

Most of those revenues will come from North America, which will account for almost two thirds of online pay-per-view (PPV) sales in 2009 ($620 million), and will pull in about half of all revenues in the segment in 2014. Meanwhile, PPV sales online are expected to grow from $176 million to $805 million in Europe, and from $115 million to $722 million in Asia over the same period.

Sales of online subscription services are also expected to grow in that time. Although revenues from online video subscriptions are negligible right now, at about $35 million (most of which is in North America), TDG forecasts over-the-top subscription revenue to grow to about $1.8 billion by 2014.