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There will be over 770bn views of legitimate free and paid-for online video in the US, UK, France and Germany this year, compared to around 640bn views last year, according to a new report from UK-based Futuresource Consulting.

"Total online video views are on track to grow by 20% and paid-for online video revenues will reach in excess of US$ 3bn this year," said Mai Hoang, senior analyst at Futuresource Consulting. "Online purchase and rental transactions are playing a part, but the majority of this revenue is coming out of the USA, predominantly through streaming subscription service Netflix. By 2015, paid-for online video spend is forecast to hit close to US$ 7bn across the four countries."

Although paid-for online video is growing, it still remains "negligible" in many markets when compared to free content, and is up against some fierce competition from other forms of viewing, such as pay-TV, free movies and television content, according to Futuresource.

The report predicts that in the future, the paid-for segment in Europe will be boosted by the launch of a handful of key regional streaming subscription services. These are expected to be led by the likes of YouTube, Apple and Netflix (with the latter scheduled to launch in the UK and Ireland early next year).

Ad-funded services are expected to contribute an ever-greater slice of total revenues generated by online video services, such as online purchase and rental services and subscription-based services.

"Brands have only recently started to harness the full potential of online video, with ad-funded revenues expected to grow by 50% in 2011 as advertisers continue to develop and refine content specifically for the online environment, rather than repurposing content originally destined for television," added Ms. Hoang. "At the same time, consumers become more receptive as ads are effectively targeted."

YouTube is singled out as one provider that has started to effectively tap the potential of online advertising, as it continues to introduce new initiatives to increase consumer engagement on ad-funded videos, such as enabling viewers to stop adverts that do not appeal to them.


"The growing range of mobile devices is playing an increasingly significant part in the online video market," concluded Ms. Hoang. "Sales of smartphones are expected to exceed 450mn units worldwide this year, fuelled predominantly by the growing influence of Android-based handsets. This groundswell is building to a significant content distribution platform, largely driven by growth in the development and consumption of apps and rapidly becoming an essential part of service providers' multi-platform strategies.


"With tablets showing even more impressive growth and evolution, content holders, broadcasters and hardware manufacturers are increasingly interested in the relatively untapped growth potential in the online video market for these devices."

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