Online Entertainment Industry Poised for Growth

Mainstream entertainment with content specifically designed for the Internet will proliferate substantially in the next year, according to the results of a jointly conducted online poll of Web viewers by Gemini Consulting and Honkworm International.

Internet content called “webisodes” (which exclude games, Internet TV, and adult entertainment) will be viewed by a larger base of Web users on a more regular basis, for longer periods of time. More than three-quarters of US Internet users have already watched entertainment on the Internet, a figure that will grow to a penetration of more than 90 percent by the end of 2000, according to the study. The size of the online entertainment market will grow 64 percent to $1.8 billion by the end of 2000, up from $1.1 billion in 1999. Approximately 29 percent of viewers who have tuned in to “webisodes” have actively sought out such programming. Most of the viewers, 64 percent, come across online entertainment programming through random surfing.

“This tells us that online entertainment is already significant but that the market is still fragmented and not yet mature enough to represent repeat traffic,” said Johan Liedgren, CEO, founder and chairman of Honkworm International. “But the market is quickly establishing destination sites to make content more accessible. Viewers will make shorter-format entertainment part of their daily routine in the office,like a coffee break, where they have access to higher bandwidth. We will see explosive growth fuelling fundamental changes in a very traditional industry.”

Web users who watch online entertainment programming so far have not stayed tuned in for long./ Approximately 60 percent have tuned in for 1 to 3 minutes, and, on average, one in five watch “webisodes” for more than three minutes.

“This billion-dollar market is trying to find its forms,” said David Ridemar, head of Gemini Consulting’s strategic research group. “Think about the impact on the online entertainment marketplace when marketing kicks in, and random viewers start coming back for repeat visits. Then this market will experience three-digit growth.”

Today, almost 90 percent of online entertainment viewers watch from home, the study found. Fewer than 8 percent tune in from the office, although the segment of viewers watching from the office is expected to grow the fastest in the coming years.

“There is a market forming in front of our eyes,” Ridemar said. “Online entertainment is becoming increasingly mainstream, but industry players are struggling to find a business model.”

The maturation of the online entertainment industry has ramifications for the advertising side of the Internet industry, as well as the content side.

“The demise of the ad banner paves the way for more creative sponsorship models where content providers and advertisers work closely together,” Liedgren said. “The entrenched network and advertising players have been put on notice that the Internet is changing the nature of entertainment programming and associated business models.”

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