Broadband Internet Drives Demand for Premium Online Content Services

WebKnowHow
Thursday, August 24, 2006; 07:33 AM

Rapidly rising broadband penetration in North America has set the stage for increased demand and rapid growth of premium or paid online content applications such as music, gaming and video/movies. This is bringing in exciting opportunities for the consumer broadband market and participants that can identify and deliver compelling content to their customers.

New analysis from Frost & Sullivan, North American Residential Online Content Services Markets, finds that this market earned revenues of $2.45 billion in 2005 and is likely to exceed $10 billion in 2012.

"For mainstream consumers, online content has been inextricably linked to Internet usage and rising broadband penetration is further cementing this bond," notes Frost & Sullivan Research Analyst Piyush Arora. "As broadband service providers continue to enhance speeds and bandwidth limits for their subscribers, new opportunities are cropping up in terms of content applications that can be delivered on these fast connections."

Premium online content applications such as music, video/movies and gaming offer broadband service providers a significant competitive advantage in a market where participants have largely competed on speed and pricing. Providing robust content can also help service providers sell 'triple play' or 'quadruple play' service bundles to customers.

Online gaming is undoubtedly the most popular of these applications, currently accounting for the bulk of market revenues, at 59 percent. Music and video are fast catching up and becoming increasingly popular among broadband consumers. At present, online music and video revenues constitute 34 percent and 7 percent, respectively, of the total paid content market revenue.

A key challenge facing all market participants is the need to strictly control unauthorized on-line content distribution as well as the piracy of copyright protected content. A related challenge is to ensure that the various competing digital rights management (DRM) technologies and standards, needed for the legal distribution of digital content, are compatible with each other. Currently, the leading on-line content distributors and device vendors use different proprietary standards

In 2004, the loss to the U.S. music industry due to illegal file sharing exceeded a massive $2 billion, which demonstrated the seriousness of this challenge. Unless the rights of artists and other copyright owners are protected, content owners - including music recording companies and movie studios - are not likely to consider the Internet on an equal footing with traditional media.

"Online content distributors and specialist content providers must therefore, continue to collaborate with content owners, technology companies, broadband service providers and other stakeholders to curb the illegal distribution of digital content," says Arora. "The online music market has already benefited from these efforts, which can reap similar results in the emerging video market as well."

Moreover, participants must take concrete steps to resolve the DRM interoperability issues, to encourage consumers to actively use the Internet as a mainstream medium for accessing paid content.

North American Residential Online Content Services Markets, part of the Communications Services Subscription, provides an analysis of the current and future market for premium or paid online content services and applications along with the key market drivers and restraints and industry challenges faced by various stakeholders in the industry. The study provides detailed revenue and demand analysis, as well as competitive analysis for the online content market. In this research service, Frost & Sullivan's expert analysts thoroughly examine the online music, gaming and video/movies segments. Interviews with the press are available.

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services, and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics. For more information, visit http://www.frost.com .