Online video becomes a real business

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eMarketer estimates that more than one-third of the total US population ages 3 and older viewed video on the Internet at least monthly during 2006, and in three years more than half of all Americans will be part of the online video audience.

“At this point, nearly 60% of all Internet users watch video regularly, and that share will increase to over 80% by the end of 2010,” said David Hallerman, eMarketer senior analyst and the author of the new Internet Video Audience report.

There were will be 108 million US Internet video users this year, and 157 million by 2010.

But do millions of viewers constitute a market?

According to “The Video Store Goes Virtual: The Global Outlook for Online Video Sales” report from Strategy Analytics, yes, online sales of television shows, movies and other prerecorded video products will become a billion-dollar business — next year.

Although video-download sales made through iTunes and other online sources will total just $298 million this year, Strategy Analytics predicts that by the end of 2007 the online video market will grow to $1.5 billion.

“2007 will be remembered as the year in which online sales of prerecorded video finally become a real business,” said Martin Olausson of Strategy Analytics. “Just like with music, online delivery of video content is now emerging as a viable and increasingly important distribution channel for content owners.”

By 2010, the report estimates that global revenues from online video sales, rentals and subscriptions will reach $5.9 billion, and account for 8% of total home video industry revenues.

Although pay-to-own downloads account for most online video revenues today, other payment models will emerge. By 2010, Strategy Analytics projects that rentals and subscription-based services will account for about one-quarter of annual online video sales to consumers.

For more on this subject, read eMarketer’s recently released Internet Video Audience report.