Making sense of online video market projections

Two new reports on the online video sector's revenues were released this week, and as usual, it's a process trying to figure out exactly what the individual implications of each one are, as well as what we can learn from them in aggregate. Strategy Analytics released a report detailing the global rise of paid online video and AccuStream predicted rapidly increasing revenues for the "online video value chain. But we've seen such predictions be off-base before, and these reports always must be tempered by companies actually reaching profitability and sustaining growth.

Strategy Analytics analyst Martin Olausson said in a webinar that global paid online video revenue will reach $3.8 billion this year, surpassing the free (read ad-supported) online video segment's projected haul of $3.5 billion. He said both segments would see compound annual growth rates of more than 35 percent over the next four years, but he projected paid online video would grow at a faster pace and generate more revenue in total. Olausson said this rapid growth would come from projects such as Netflix's streaming service, the Xbox Live Video Store, and Comcast and Time Warner's "OnDemand Online" initiative, whose content partner announcements dominated the headlines this week. Although Olausson is bullish about these programs' potential for revenue generation, there remain plenty of skeptics who doubt that either OnDemand Online or Netflix's streaming service will make significant additions to these companies' bottom lines.

As for AccuStream's report, it examined companies in the "online video value chain," which the research firm considers to consist of video ad networks, video platforms, and CDNs. The report pegs total 2009 revenues for this diverse group of companies at $1.3 billion, and expects revenues to climb 26 percent in 2010 to about $1.6 billion. The report said video ad networks and CDNs are the "economic pillars of the video value chain," and forecast that these groups will account for 86 percent of total industry revenue in 2009. But other reports suggest video advertising might not be growing at such a clip, and increased competition in the CDN market could temper revenues here as well due to falling prices for delivery services coupled with slowing aggregate traffic growth. Also, the AccuStream report did not make it clear if it was lumping total CDN revenues, only a fraction of which come from video delivery, into this general category.

What do you think about these reports, and what are you actually seeing on the ground as it relates to revenue generation? As everyone's favorite online video contrarian Dan Rayburn always likes to point out, traffic growth and audience increases are fine and dandy, but if these upward trends aren't coupled with advancing revenues, they likely are for naught. 

- Pete
@fierceonlinevid