The number of transactional exchanges for video content have been steadily declining since 2001, and the erosion likely will continue as consumers increasingly opt for subscription models to acquire their content.
Ben Keen, chief analyst for media research at IHS Research, told an audience at the IHS European Technology Media and Telecommunications summit in Paris, France, that retailers will increasingly be squeezed as telcos and other content distributors pick up more customers buying into subscription plans.
He said transactional spending--consumers buying physical media or renting video-on-demand content--made up 66 percent of the market in 2001. That's slid to 45 percent today and is forecasted to reach 40 percent of the market by 2016, with subscriptions picking up increasing share.
"Subscription is a powerful business model," Keen said. "It's sticky, and people don't have to think too much. When you only have to ask a person one time a year, 'Do you want to buy this,' rather than every time they want content, it's much easier."
And, he said, telcos are going to continue to benefit from that subscription growth, both as they offer faster broadband service and more content options.
On a related note, Keen pointed to Apple, which, so far, hasn't offered a subscription service for content.
"Apple is laser focused right now on their hardware sales, it's not focused on being a content and services company," he said. But, he pointed out, its video sales and rentals already give it a 9 percent share of the market.
"Their early attempts saw some significant pushback from rights holders," Keen said. "Content owners were worried about the business model, it just wasn't right yet."
In late 2009, Apple reportedly began shopping the idea of a $30-a-month subscription service to TV networks. Apple was looking to leverage the more than 65 million users it already has on iTunes, but network execs weren't buying.
The iTunes offer from Apple received mixed reviews from execs hungry for new revenue streams, since they were concerned about the possible problems it might create with existing content delivery partners like cable operators.
Keen said that although no subscription service exists for video content through Apple, the current charge of entry into the Apple ecosystem is its devices.
"For Apple, it's about the user experience, the user interface, the hardware," he said.
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