User generated content sites could struggle to generate cash

LONDON - User generated content videos are expected to account for more than half of online video by 2010 but sites will struggle to make money from viewers, according to research firm Screen Digest.

Last year's attention-grabbing explosion in UGC video, led by sites such as YouTube, had a strong impact on the overall online video market. In 2006, 47% of online video in the US was created by amateurs.

However, websites have not been able to discover a way to make large sums from this resource and the surge may be followed by an end to the "honeymoon period", the company warned.

Screen Digest said that advertising will be the main source of revenue for UGC websites by 2010. It estimates that the proportion of UGC will grow to account for 55% of all video content viewed online in the US in 2010.

However, the Screen Digest report said user generated video would only produce 15% of the total revenues for the online video market in the US, despite accounting for nearly half of the overall amount of videos produced.

The report, which is available online, warns that the key task facing companies operating in the UGC arena will be finding a financially viable business model.

Arash Amel, senior analyst at Screen Digest and author of the report, said: "No one has found a way to make real money from the huge audiences who participate on these sites.

"User generated online video will drive the majority of internet content consumed in the future, but despite its huge popularity with web surfers worldwide, the major players have yet to find a way to generate significant revenues from it."

Screen Digest identified five key business models currently being used for user generated content websites; advertising, content licensing, digital sales, subscriptions and technology licensing.

Amel added: "2006 was a phenomenal year for user generated online video, with exceptional growth in the number of streams and with Google's $1.6bn acquisition of the 18-month-old YouTube.

"At the same time it's also proving rather difficult for these sites to monetise their video streams. Added to recent high profile executive departures from two significant players in the industry, Revver and Guba -- the signs are all there that the honeymoon period is over."

Screen Digest said that the massive popularity of user generated content video sites such as MySpace and YouTube, which were acquired in 2006 by News Corp and Google respectively, were a big incentive for many global media organisations, including Sony, Time Warner, Yahoo!, and Viacom to enter the market.

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