“Despite significant improvements in the availability and quality of content and services, success stories are relatively thin on the ground and European consumer demand is actually declining,” JupiterResearch said.
According to the report, contributing to this trend is a greater awareness on the part of consumers about the “realities and limitations of digital paid content offerings,” including the size and scope of paid content libraries, the quality of files and digital resource management (DRM) “interoperability issues.”
“With a few notable exceptions such as music, the European online paid content and services market has failed to make significant headway,” said Mark Mulligan, vice president of JupiterResearch and lead author of the report. “The Internet remains a predominately free, advertising-supported medium.”
In order to survive the market shift, Mulligan says companies seeking to sell web content and services to European web audiences will need to maximize advertising revenues, and adapt their business model to the realities of the market.
“There is a clear need for content owners to explore ways in which they can explicitly share in advertising revenues to offset modest direct revenues online and to reach elusive, typically young, nonpaying online audiences,” Mulligan said.
According to the JupiterResearch report, to succeed in such an environment, content and service providers need to focus on smaller niche markets, wherein there will be fewer but more dedicated consumers.
“Adoption by relatively small [amounts] of enthusiasts rather than broader, mainstream audiences will be key to future revenue growth,” the company said in its report.
JupiterResearch analysts project that downloadable music and online games will continue to lead the market and will generate the largest paid content revenues in the future European market. According to the report’s projections, online music will generate $1.89 billion and online games $1.35 billion in the European market of 2011.
“Security and Safety” is projected to be the largest paid service sector of the online European market in 2001, with revenues of $1.75 billion.