A new breed of retail-based Internet video delivery devices has emerged over the past few years, the most notable being Apple TV. However ABI Research notes that these devices have had difficulty resonating with consumers, largely due to their higher prices and competition from legacy set-top boxes, as well as confusion over the benefits they will ultimately bring to the buyer. Overall, ABI Research believes that this new breed of devices will see shipments of 1.2 million in 2008.

“Since this category first emerged in 2004-2005 with the debut of Akimbo’s public Internet VOD product, vendors of these products have struggled with a number of hurdles that have so far made this market relatively unsuccessful,” says research director Michael Wolf. “The high cost of these devices, their reliance on the home network, the need for consumer self-installation, and the scarcity of content have all contributed to their lack of commercial success.”

Nonetheless ABI Research believes that two factors offer new hope for these devices. While early examples lacked significant amounts of content, new models such as Vudu’s video device have significant libraries, including high definition movies. Additionally, consumers’ growing hunger for both user-generated and professionally produced content on the Internet could create greater demand for these new devices.

“This market will continue to be challenged by traditional set-top boxes, which are incorporating more VOD and public Internet delivery features, and by the emergence of VOD services on the Xbox 360 and PlayStation 3, and those such as the TiVo/Amazon Unbox offering,” adds Wolf. “However, we believe that there is a possibility of a break-out success among these new entrants if they can create compelling content offerings, make consumer installation and management incredibly easy, and offer both the hardware and content at compelling pricing. We believe one way to achieve this is by incorporating some premium content using advertising support.

ABI Research’s recent study, Home Networking and Digital Home Network Market Analysis examines all segments of the home networking and networked entertainment market.

In addition, ABI Research has just released its Home Networking Forecast, containing market forecasts for a variety of networked devices as well as forecasts related to the installed base of home networking households.

Both are included in the firm’s Home Networking Research Service, while the former is also part of the Wi-Fi Research Service.