Will ad-funded TV streams kill off the video download market?

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stu-mugshot2.jpgStuart Dredge writes…

There’s no shortage of big firms trying to sell us video downloads, including Apple and Microsoft. In theory, they should be pushing at an open door.

Faster broadband connections are more widespread, devices like Apple TV make it easy to watch these downloads on our proper TVs, and more people have video iPods or PMPs to watch these vids on the go, too.

Yet as Gabrielle said in our story earlier today, Forrester Research thinks the video download market will “soon become extinct” in favour of advertising-funded streaming video, which will be free to watch.

joost-screenshot.jpgThere’s certainly a head of steam building up around ad-funded video streaming. Internet TV service Joost announced last week that it had raised $45 million in funding from investors including CBS and Viacom, for example.

In fact, CBS offers proof of how much the big broadcasters are swinging their weight behind ad-funded streaming video. The broadcaster is building what it calls ‘the CBS Interactive Audience Network’, which will distribute shows via embedded players on sites like Joost, AOL, Microsoft, CNET and Bebo. They’ll be free to watch, with advertising revenues split between CBS and the host sites.

Meanwhile, rival broadcast behemoths NBC Universal and News Corporation have announced their own service, which will distribute video content from 12 broadcasters and a couple of film studios via sites including AOL, MSN, MySpace and Yahoo. It too will be ad-funded, with the likes of Cadbury Schweppes, Intel and General Motors already signed up as advertisers. Shows will include The Simpsons, 24 and Saturday Night Live.

What I’m wondering, though, is how the business model for these ad-funded streaming TV services will work if you want to actually keep the content, or at least watch it on a device other than your computer. Let’s say the new season of 24 is being streamed online: at what point can I download episodes to my iPod to watch on the train? Will there be a delay until the DVD goes on sale, and how will they be priced?

simpsons_family.jpgThere’s also geographic questions to be answered by these ad-funded streaming TV services. Let’s say Fox releases new Simpsons episodes online, with advertising from General Motors and co. Will they be restricted to US viewers, or will there be separate streams for us Brits with localised advertising? And if the latter, will it launch at the same time as the US version, or will we have to wait?

Questions, questions. It’s clear that the broadcasters see ad-funded streaming as a huge part of their future. It remains to be seen if they’ve put an equal amount of thought into how us viewers will want to watch them.

Another issue is interactivity. Imagine how powerful it’d be if we were able to chat to other people watching 24 or The Simpsons at the same time as us on these services. What about opening up the streams too, so I could post the embedded player on my own website or blog, and share in those ad revenues?

Finally, the really interesting thing about the CBS / NBC and News Corp initiatives is the fact that they DON’T include YouTube. Is this the broadcasters playing hardball with Google in order to secure the best revenue-sharing deal, or a calculated attempt to sideline the popular video-sharing service for its perceived misdeeds?

Forrester may think ad-funded video is going to kill off the download market, but it’s far too early to figure out how soon that’ll happen, if it’ll happen at all.

Stuart Dredge