A new Insight Research study says IPTV, along with streaming video and audio, will generate $70 billion in revenue over the next six years, from both network-derived services and content-derived income. Telecom companies are well positioned to capture a substantial portion of that revenue, according to Robert Rosenberg, Insight president, if they can build business plans that are flexible enough to adjust to shifting revenue trends.

In fact, they may be better positioned to benefit than cable and broadcast companies, who have more entrenched business models to defend, Rosenberg said.

Consumers are clearly willing to pay for on-demand audio and video, Rosenberg said, which is why he forecast a compounded growth rate of 29% from $5.2 million in 2008 to $17.8 million in 2013. But the business models for revenue capture are still evolving, Rosenberg said. While streaming audio services, namely Apple’s iTunes, have succeeded on a subscription model, chances are that streaming video is more likely to evolve as an ad-supported model, the Insight report states.

The report lays out two separate potential revenue streams – network-derived revenue for providing the technologies required to deliver a video stream such as encoding, digital rights management, content hosting, delivery services and performance measurement; and content-derived revenues for the video content itself.

“Telecom companies like Verizon and AT&T have already capitalized on this trend by building the networks to deliver this content. The question now is when do they start making money on those networks,” Rosenberg said. “In our report, we forecast both IPTV as a platform for revenue as well as streaming media [over broadband pipes]. Network-derived services – encoding, DRM, etc. – that is the underlying pure play from a telecom point of view. They are going to make money on that.”

It’s less certain how telecom companies make money on content-derived services and whether today’s cable model, where content aggregators sell that content to a cable company or telco, which then provides it to consumers, survives the Internet delivery of streaming media directly to the consumer, Rosenberg said. But he believes the telecom players are well positioned.

“By 2013, the biggest numbers by far, anywhere from three to four times the other numbers, was the IPTV content and the streaming content,” Rosenberg said. “Those are the big buckets. However, the notion of a walled garden becomes more difficult to maintain. The cable operators, given the longevity of their business models, probably will have a much more difficult time adjusting to a new reality than the telephone companies who are just getting into it.”

The Internet streaming video model is likely to break down the current content models, leading to new models. If phones companies can stay flexible enough in their business models, they stand to benefit.

“If I’m an AT&T or a Verizon or a Century Tel or whomever, what I would look at is how to start to form relationships not with the aggregators of content but with the creators of content,” Rosenberg said. “We’ll see more one-to-one relationships between a movie studio and a telephone company or a production outfit that products a sitcom, as opposed to going to an NBC to re-broadcast what they’ve aggregated. This is much more disruptive to the traditional notion of the broadcast or cable operator than it is to a phone company.”

The executive summary of the report: Streaming Media, IPTV and Broadband Transport: Telecommunications Carriers and Entertainment Services, is available at http://www.insight-corp.com/IPTV08.asp.