Paid video downloads facing extinction

Services that charge users to download movies and TV shows are destined for extinction, according to a recent analyst report.

Forrester estimates that 2007 will emerge as the peak for paid download services, such as Apple's iTunes movie store or Wal-Mart's movie download service, and that it could all go downhill from there. 

The research firm claimed that paid television download services will begin to give way to ad-supported services, such as YouTube or the new joint service from NBC and News Corp. 

Forrester also predicts that movie studios will abandon the paid download model in favour of subscription-based services.

The paid download system has been booming in the past year, growing from $98m to $279m annually, according to Forrester.

Apple alone has logged more than 50 million TV shows and two million movie downloads. However, the popularity of movie downloads on iTunes has been waning in recent weeks.  

"The paid video download market in its current evolutionary state will soon become extinct, despite the fast growth and the millions being spent today," declared James McQuivey, a principal research analyst at Forrester.

The research firm credits much of the predicted drop-off to early adoption by a "niche of media junkies willing to spend heavily" representing fewer than ten per cent of all adults online.

McQuivey was more optimistic about the adoption chances for "ad-supported and geek-free" services. He also pointed to set-top boxes as an avenue in which ad-supported services could thrive.

Forrester said that Apple will have to retool Apple TV from a strictly iTunes device to a box that also supports ad-supported content from third parties.

Other manufacturers, such as Cisco Systems and Motorola, may add to the Apple squeeze by partnering with local cable companies to deliver content to set-top boxes.