Download market booms

Rentals leading exponential growth

Video downloads will grow from 215 million in 2008 to more than 2.4 billion in 2012, with rentals accounting for about half of these, according to research published Thursday.

Research group ABI said that rental, download-to-own and subscription models will all see significant traction as new solutions for bringing online video to TV flourish. However, about half of all downloads will be through rental, in particular for online movie rentals, it said.

"The opening up of rental for video on iTunes is not surprising, given that is how most consumers looking for legal, paid movie downloads will choose to acquire them," ABI research director Michael Wolf said. "Distribution offerings for movies that are in attractive release windows and that offer easy viewing on a TV or portable screen will see the greatest success."

However, challenges still remain for this market, ABI said, particularly competition from legacy VOD services as well as unattractive ownership and rental terms offered by the studios.

The group added that rival service providers such as cable and IPTV are offering impressive VOD libraries to consumers through their traditional pay video services and, increasingly, video service providers such as Comcast are expanding into over-the-top streaming.

Additionally, ABI said that over-the-top rental terms are becoming unattractive as the studios dictate the same rental terms to all distributors, even iTunes.

"Studios are locked into the same 24-hour 'once-started' viewing window and similar pricing for all online rental partners," Wolf said. "We believe that over time they will begin to offer greater flexibility, in particular as DVD and other physical media continue to mature and new consumer Internet-to-TV hardware expands their audience of consumers."