The Diffusion Group (TDG) has released a new research report on TV over-the-top documenting the dramatic shift to on-demand delivery of Internet video.  According TDG,  on-demand delivery to the TV will grow from $621 million in revenue in 2009 to $2.1 billion by 2014, accounting for more than 25 percent of total annual video-on-demand (VOD) revenue.

TDG Senior Partner and digital video expert Colin Dixon says this trend is fueled by  the rapid diffusion of ancillary web-enabled platforms such as game consoles, Blu-ray players, and hybrid set-top boxes. The market penetration of these secondary platforms is widespread and growing.  At the same time,  TVs with embedded broadband support are now starting to enter the market.  These trends set the stage for a rapid uptake of Internet-to-TV video services over the next five years, including both pay-per-view and subscription-based offerings.

In a TDG announcement, Dixon put this trend into perspective of the overall video market, calling it a threat to traditional video delivery. “Most industry estimates predict 2014 U.S. DVD rental revenue will exceed more than $8 billion,” Dixon said. “By that time, OTT video rentals will top $2 billion. If that fails to warn companies like Blockbuster and Time Warner Cable as to the magnitude of this threat, they are asleep at the wheel.”

From Skitter.TV’s perspective, one person’s threat is another’s opportunity.  As more and more consumers switch to Internet-based TV and video as a major source of entertainment, the telecom service provider has an opportunity to take advantage of this new revenue stream by offering converged TV services.

For service providers, the move to Internet video delivery can monetize network traffic while improving customer satisfaction. The research from TDG and others clearly shows that consumers will be using their Internet access to enjoy entertainment.  The service provider can ensure customer loyalty with services that optimize performance and provide a meaningful user interaction with the broad array of TV and video online.  From our point of view, the trend toward Internet-based VOD is a compelling opportunity to for the telecommunications industry. With Skitter.TV, telco’s can implement a video platform that combines live broadcast and satellite TV with video-on-demand with Web video, a distinct advantage that can help achieve more ARPU while reducing customer attrition.

The research clearly shows that customers will increasingly consume Internet video, without or without a revenue stream for the service provider who delivers the Internet.  At Skitter, we’re committed to revolutionizing the business model for TV and video over IP, making this growing channel profitable — especially for Tier Two and Tier Three telco’s — by reducing implementation complexity, time and cost.

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