Get Ready For Online Video Price Wars

With Apple and Amazon about to throw their hat in the ring, existing players are looking to fight back with price cuts and content promos that will suck the profits out of the legal video download business.

The first salvo in what will be a brutal price war is being fired by San Francisco-based Guba, which is going to announce that users will be able to download the movies for $9.99 on the very day the movie, is released on DVD. In addition, they are going to sell catalog movie titles for $4.99 and television shows for 49 cents an episode. Movies can be rented for 99 cents.

These prices are going to put pressure on existing download services, Cinema Now and Movie Link, which despite a big head start have been puttering along. The competition is only increasing. Amazon and Apple are next up, joining the ranks of existing players. Microsoft has its own plans, both as an infrastructure provider and also as a competitor with its Zune line of devices. (Also, Playing into Apple’s hands.)

The mad dash to the video market is predictable. In-Stat, a market research company predicts that the global market for “online content services is expected to expand by a factor of 10, growing from about 13 million households during 2005 to more than 131 million households by 2010.”

The big driver of online video content is easy broadband access and faster downloads. In-Stat predicts that households with broadband will more than double between 2005 and 2010 globally, growing from about 194 million in 2005 to more than 413 million by 2010. Of the current broadband homes, nearly 12.8% are getting content from online content aggregators the research firm predicts.

ABI Research analyst Michael Wolf predicts that networked devices, which decrease the reliance on personal computers, will boost the demand for Internet-delivered video even more. He predicts that the percentage of Internet-delivered video viewed on a portable device will go from just 3% today to 16% by 2011.

Such forecasts are one of the reasons why everyone wants a piece of the online video pie. Which makes me wonder if we could a painful shake up in a few months. Frankly, I am not at all surprised that Guba is getting aggressive, and using pricing to get a big enough slice of the market. It would not be surprising if others respond to Guba’s moves with their own “promotional offers.”