1. the next biggest thing that’s about to break or
2. the thing that’s most broken or
3. that which has broken the most hearts or
4. all of the above

In spite of the sorry state of commercial video distribution over the web, the market is expected to explode in the coming years.

• Informa Telecoms & Media forecasts that by 2013, US online TV and video services will generate revenues of $7.9 billion. In 2007, the market was already worth over $1 billion and by 2008, that figure will leap to $4.7 billion. [link]
• On-demand media services will generate $1.1 billion in consumer spending by 2012, from $33 million this year in the US and major European markets, according to Screen Digest’s “On-Demand Media: Re-Inventing The Retail Business Model” report. [link]

As more viewers look to access their video via the web and IPTV rather than from cable and satellite, the friction factor grows larger and larger.

Streams and downloads offer the promise of increased freedom — letting you shift time, location, and player. The promise is one of greater flexibility, where anyone can easily fit media and entertainment choices into their life. But the reality, at least now, is far from that promise.

The current state of online commercial TV and movie distribution is in a startling state of disarray. Options for consumers are at best limited and confusing, and quite often subject to sluggish speeds, poor video quality, broadband throttling, limited selection, proprietary software and non-integrated component hardware. You can also add limited network capacities and increased broadband traffic to the list, but the perhaps biggest long-term threat is the range of constraints placed on consumers by the content owners through excessively strict DRM schemes.

The studios and networks would do well to take a closer look at the music industry. They’re already learning the sometimes difficult lesson that restricting usage just increases customer frustrations. In 2007, Apple introduced a selection of DRM-free music in iTunes, Amazon upped the ante and introduced its catalog of 2 million songs unencumbered by DRM. The music industry is slowly coming to grips with the fact that consumers now control the market in a way never before possible. Unfortunately, the film and TV industries don’t see the connection.

Sure, the music industry has historically been less attached to DRM; just look at CDs vs DVDs. As Steve Jobs noted,

“Video is pretty different than music right now because the video industry does not distribute 90 percent of their content DRM free; never has, and so I think they are in a pretty different situation…” [link]

Tru enough. But as video consumption continues to shift from TV to the web, consumers will grow more and more weary of content that’s fundamentally out of sync with their needs. Marketers who allow and promote engagement with their customers will see the opportunity to thrive; those whose products produce more frustration than satisfaction will watch their market share slip away.

Comscore lists a 20.5% annual growth — to $123 billion for 2007, up from $102b in ‘06. Their base numbers are a bit off from the Forrester/Shop.org report issued last May, which came up with 2006 online retail sales of $146 billion.

But let’s not quibble. After all, give or take twenty billion, it’s worth noting that both sources agreed on a projection of 19% online retail growth for 2007, so 20.5% is welcome news.

Congratulations to all who met or surpassed their online sales goals in 2007. From here, the prospects for 2008 look bright.

Have a recommendation? Feel free to post it here — I’ve got some travel time booked and would love to catch up on the latest.