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Paid Video Downloads Not Yet Taking Off

Digital Video in America” report shows that 7 in 10 Web-enabled U.S. households currently have digital video on their home PCs; Television content comprises 77 percent of paid digital video downloads

A new report from The NPD Group, a global provider of consumer and retail information and insights, shows that the acquisition and use of digital video has reached the mainstream, but online services that allow people to pay to download video content have only caught on with a small percentage of consumers. According to NPD’s “Digital Video in America” report, in 2006 seven in 10 Internet-enabled households in the U.S. had digital video files saved on their home PCs.

“Many consumers are already experimenting with digital video – the very same material you can buy or rent from major retailers,” said Russ Crupnick, entertainment industry analyst for The NPD Group. “And yet the video electronic sell-through market has yet to excite the imagination of consumers enough to greatly affect the bottom line.”

NPD’s report delved into what consumers were paying to download – finding that more than three-quarters of all video purchased was television content. Surprisingly one-third of the purchased TV programs were also available for free on TV network Web sites.

Digital video download rates now stand about where the music market did three years ago; however, current electronic sell-through options are little more than a curiosity to the mainstream Internet user. In fact, fewer than 2 percent of Internet households purchased digital video content in the first quarter of 2007.

Even among the small group of consumers paying to download video files, digital video download services have not yet become integrated aspects of consumers’ TV and movie viewing. Thirty percent of consumers who purchase video for download, purchased just one digital video title per quarter and only 14 percent of digital video consumers reported using digital video download services at least once a month.

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As with music, trading of commercial content on peer-to-peer (P2P) file sharing networks plagues the movie and TV industry. NPD estimates that P2P users download over 100 million commercial size movie and TV files annually.

“The limited commercial success we’ve seen so far with digital video content has been almost entirely driven by television,” Crupnick said. “Content owners, aggregators and distributors need to look to the factors that have contributed to that success to understand how they can further excite consumer interest and drive digital video revenues.”

The video files on PCs in the U.S. cover a broad range of content types. Adult content was found on the PCs of nearly one-third of all U.S. households (39%). By comparison, movie and television content was saved by just 19 percent and 18 percent (respectively) of U.S. households.

Source: NPD’s “Digital Video in America” report is designed to deliver the most comprehensive view of consumer interaction with digital video files. Information was collected continuously from the PCs of 11,000 volunteer U.S. households. The data was then balanced to represent the online population.

About The NPD Group
The NPD Group is the leading provider of reliable and comprehensive consumer and retail information for a wide range of industries. Today, more than 1,600 companies rely on NPD to help them drive critical business decisions. NPD helps our clients to identify new business opportunities and guide product development, marketing, sales, merchandising, and other functions. Information is available for the following industry sectors: automotive, beauty, commercial technology, consumer technology, entertainment, fashion, food and beverage, foodservice, home, office supplies, software, sports, toys, and wireless. For more information, visit http://www.npd.com/.

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