The global online entertainment market will expand at a 24 percent compound annual rate, swelling to more than $36 billion annually by 2009, the report predicts. RHK analysts concluded that rising broadband penetration is helping online entertainment steal market share from traditional media outlets.
“Broadband connectivity has been a key driver and will gain even more significance in enabling new forms of content services through the introduction of new high-quality features that will enhance the user’s experience,” said Stephane Teral, principal author of the report.
Most prominent among those news features, according to RHK, is the ability to receive Internet content on TV sets.
“The next five years will see IPTV come into its own as a new distribution medium with its own new business rules and challenges,” said Josette Bonte, director of RHK’s broadband content and video services practice. “It’s very embryonic right now, but it’s growing at a compound annual growth rate above 100 percent.”
Cable providers such as Comcast, local telephone companies and new IPTV companies such as HomeNet Communication are moving forward with IPTV programs.
Earlier this year, Woodland Hills, Calif.-based XTV launched what it said was the “world’s first” adult Internet-enabled TV product, a set-top TV box that works with a broadband connection and a conventional TV, allowing viewers a plethora of adult titles and interactive content.
“It’s television on the net and it’s all about simplicity,” David Koenig, owner of XTV parent company Holio.net, told XBiz. “It’s exactly what people are used to doing on the Internet, except they can do it sitting on their couch. Everything is genre-based, simple, and easy to use. It’s the same interface they’re used to and they will feel right at home.”
The XTV set-top box includes a remote control and operates with a digital high-quality signal. When fully ramped up, the adult network will include more than 50 channels of hardcore content from studios such as Private, Legend and Filmco. Boxes cost $180, with monthly subscription fees of $30.
“This is one of the most hotly contested areas in the online space and home theater space,” said Lance Ulanoff, executive editor of PC Magazine’s online edition, pcmag.com. “What we’ve seen is a mini-explosion of set-top boxes for Internet television. There are a lot of players with connections to the porn industry. There are a number of providers, like XTV…. They have their own content, an unusual range of programs, but they are also talking to major networks and cable about porting over their content, too.”
The RHK report also predicts a surge in demand for VOD. Already a profitable segment for adult companies, revenues from VOD products are expected to be as high as $8 billion worldwide by 2009.
“We forecast that VOD in all its incarnations will [reach] revenues that equal over a third of DVD sales,” Bonte said. However, she added that her firm expects DVD sales to continue to rise as well, despite the increased competition from online outlets.