Analyst Sees Fast Growth For All Forms of Video

A non-TV company could bid for a content business
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Video is hot. Online video has been getting most of the fevered attention, but offline video, that is, television is much bigger and also showing strong growth.

In a new report headlined “Catching Fire,”  analyst Laura Martin of Needham & Co. projects that in 2014, video revenue will grow 8% to $170 billion, accelerating from the 6% growth of 2013. Those figures include both advertising and distribution revenue for online and offline media.

Martin’s point of view is that online and offline video are merging. That could lead to a climate in which, for the first time, companies outside the current TV ecosystem are expected to be bidders for content companies as a drive for consolidation starts putting them on the block. (Most likely to be sold: Scripps Networks, she says in her report.)

But there remains a large gulf in the size of online and offline video. Martin says that in 2013, television revenues rose $7 billion to $150 billion, while digital video revenue rose $2 billion to $8 billion. Video advertising revenue was $75 billion offline, and $4 billion online.  Video subscription revenue was $75 billion for TV and $4 billion online—with $3.6 billion of that going to Netflix.

Martin says several factors combine to account for the growth in video spending. Those include:

  • YouTube ad revenue rising as it works more closely with Nielsen, the measurement company most familiar to major marketers.
  • A drop in ad skipping as TV Everywhere and VOD rollouts reduce dependence on DVRs.
  • Online companies spending more on good old TV advertising. Martin estimates online companies will spend $1 billion more on offline commercials in 2014.
  • Interactive and addressable TV advertising, which could fetch 41 billion by 2015, growing 30% year over year, driven by rapid acceptance of Internet-connected TVs.

Martin says video will be grabbing a bigger chunk of online ad spending. “There has been a noticeable market share mix shift into mobile and video advertising and out of classified, display/banner, and search advertising over the past several years. In fact, all online ad categories lost share to mobile and video” in the first half of 2014, she writes. “The tide is rising for online content and business models that support video ads. If they are also mobile, that implies even higher economic upside.”

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