Interest in and consumption of online media continues to grow and remain strong. While pay-TV operators have not yet seen a significant impact on their subscriber bases, early indicators suggest online media will eventually compete with pay-TV.

A recent ABI Research consumer survey of 1005 consumers revealed that about 32% of those surveyed are interested in watching Internet video on their TV – nearly double the number who expressed the same interest in a similar 2008 survey.

However, while interest in connected devices is growing and consumers are clearly intrigued by alternative sources for video content, in 2010 only 13% said they would consider cancelling their pay-TV services and receiving video content just from the Internet, via over-the-air/terrestrial transmission, and/or rentals.

Why the continued loyalty to pay-TV? According to ABI Research practice director Jason Blackwell, “The alternatives to pay-TV -- online services from Netflix, Hulu and the like -- are decentralized and can be complicated to negotiate.”

Industry analyst Michael Inouye agrees, “Trying to fit all these individual pieces together to replicate what you get from pay-TV, is often either too much work, or certain content is still missing. It’s partly the multiple content aggregators involved, but there may also be technological issues – insufficient bandwidth in the consumer’s online connection to cope with the demands of HD, for example.”

Analysis of the drivers and inhibitors of online media uptake suggests that consumer education and information will help foster consumer demand, especially among the less technically-savvy. User interfaces need to be simplified as far as possible, and paired with appropriate controllers or input devices. Finally, Wi-Fi – despite some lingering quality-of-service issues, remains the home media networking technology of choice for most consumers. Service providers will have to live with that preference.

The ABI Research report “How Consumers Buy, Consume, and Manage Digital Content” discusses several surveys conducted by ABI Research over the course of the past three years in an effort to understand the shifting patterns of digital media consumption. The above questions and many more topics are discussed.

This report is part of two ABI Research Services, Connected Home and Digital Media, and will be included in the upcoming Digital Living Research Service.