Viewers will pay for online video, report says

Consumer spending on video will hit $3.8 bil this year

Despite all the optimism surrounding the potential for free, advertising-supported online video, some analysts see a far more lucrative market for selling video content online -- one that will materialize this year in fact, despite the rocky economic picture.

According to a new report issued by Strategy Analytics, consumers may be far more willing to open their wallets to purchase video content on the Web -- much like they do with music -- than many once believed.

The Boston-based researched forecasts that globally, consumer spending on online video content will reach $3.8 billion in 2009 in spite of the deep, worldwide recession. That figure should exceed the $3.5 billion in ad revenue for online video expected this year, the report says.

Indeed, even as Hulu and other premium ad-supported video sites surge in popularity, Strategy Analytics sees paid video growing faster than free video over the next several years -- at a rate of 39% annually through 2012 versus 37% for ad supported video.

Perhaps surprisingly, the report actually credits the recession in helping fuel this trend. "The economic downturn and diminishing advertising budgets have increased the focus on consumer paid content on the Web in the last six months," said Martin Olausson, Strategy Analytics' director of digital media research.

Advertising budgets across the board have taken a major hit, slowing online video's ad growth, said Olausson, who presented a Webinar on this subject late last week. At the same time consumers have rapidly taken to emerging stay-at-home entertainment options, such as Netflix WatchNow and Xbox Live Video Store -- as well as various pay-per-view platforms offered by cable companies, Olausson added.