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Over-the-top video revenue grows 60% in 2012

ABI Research sees traditional pay TV model threatened going forward
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The increased presence of Internet-connected consumer electronics devices helped drive the over-the-top video market past the $8 billion revenue mark internationally in 2012, a 60 percent year-over-year growth, according to statistics compiled by ABI Research in its "OTT and Multi-screen Services Research Service."

The continued growth of connected devices should push the market past $20 billion by 2015, the researchers suggested, and could threaten the existing pay TV market--or at least change the way it operates. In 2012, market leaders Netflix (Nasdaq: NFLX), Hulu and Amazon.com (Nasdaq: AMZN) experienced 50 percent year-over-year growth.

The growth pattern has caught the attention of content providers and could, in the end, result in a new way of looking at the content delivery business, senior analyst Michael Inouye said in an ABI press release.

"The shift to digital and OTT distribution is accelerating, particularly as content providers increasingly warm up to these channels," Inouye said. "While Pay-TV services are still afforded many advantages we are approaching the proverbial fork in the road when content owners will decide if they continue down the same path or forge ahead, shaking up the primary means of media distribution as we've known it."

OTT is apparently marching to the beat of its own drummer. Rather than gaining more money from subscriptions--58 percent in 2012--it's going to see a wider diffusion of revenue and a drop in subscription fees to 32 percent by 2018, the researchers said. This, the report added, is "driven by a continual shift in consumer demand towards newer forms of digital content distribution."

It's not as if pay TV is going to go away, added Sam Rosen, ABI practice director.

"While we still see great value and strength in the Pay-TV sector we are also starting to see the pieces that will accelerate change fall into place," he said in the press release. "Whether it's Netflix expanding to International markets or ABC and CBS enhancing catch-up services the building blocks that will restructure the how, when, and where consumers view content are starting to give shape to a new media future."

That future "isn't devoid of traditional media nor is it a matter of new channels necessarily winning, but rather a redistribution of wealth within the value chain," Rosen concluded.

For more:
- ABI issued this press release

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