A la carte paid video downloads, such as those offered at Apple’s iTunes and Amazon’s Unbox, will peak in 2007, generating $279 million in revenue, up from $98 million last year. Instead, ad-supported and subscription based models will drive the online video market, according to Forrester Research. Forrester’s survey showed that only 9 percent of online adults have ever paid to download a movie or TV show. And that tiny minority is primarily composed of “niche of media junkies” willing to spend heavily on such content; they do not represent mainstream consumers, according to the study.

”The paid video download market in its current evolutionary state will soon become extinct, despite the fast growth and the millions being spent today,” says analyst James McQuivey, the study’s author. He predicts that TV and cable networks will shift the bulk of paid downloading to ad-supported streams where they have control of ads and effective audience measurement. The movie studios, whose content only makes up a fraction of today’s paid downloads, will put their weight behind subscription models that imitate premium cable channel services.”

Other findings from the study:
-- Apple will have to rethink Apple TV: Though launched with great fanfare a few months ago, Forrester says the Apple will have to shift it from a closed pay-per-view system to an ad-supported, broadband service provider model that will include YouTube videos alongside ABC.com TV shows directly on the TV. At the same time, set-top boxes that can access the web, as developed by Cisco and Motorola, will give Comcast and Time Warner a way to offer competing online-based, ad-supported content.

-- Ad-Supported TV Show Downloads: Forrester cites new technology, such as the Adobe Media Player, will allow consumers to download video for playback without losing the ads that were sold with the video. ABC is expected to be the first to test this model next year. Furthermore, the streaming of ad-supported TV shows could eclipse DVR use by the end of 2008, giving advertisers reason for cheer because this shift helps combat ad-skipping, while consumers are likely to embrace this model because it’s cheaper than a DVR and is more flexible. Release