The market for premium Internet content is exploding, according to ABI Research, as major studios and content aggregators are working to make some of their content available as digital downloads. They expect the television to become the ultimate destination for Internet video content, and for set-top box Internet video to deliver $1.5 billion in service revenue by 2012.

“The biggest challenge for online video providers and consumer platform companies today is bridging to the TV,” says ABI Research director Michael Wolf. “Over the next few years new solutions from the likes of Apple, Netgear, and Sony will help cross this divide, making √† la carte video download and viewing much easier.”

“That doesn‚Äôt mean this transition will be an easy one,” cautions Wolf, “factors such as video quality, pricing of content, and technical glitches will persist for some time.”

In a recent ABI Research survey of online consumers, 12% indicated that they have purchased some form of video content delivered over the Internet. Of those, the vast majority (71%) watched this video on their PCs, while another 16% watched it on a TV using a burned DVD. Another 8% watched it using a gaming console as their video playback device. ABI Research believes that of all the consumer platforms for TV playback, video game consoles will lead in total revenue for public Internet video delivery, because of their close proximity to the TV, large hard drives, and the high penetration of online services among gamers.

Wolf concludes, “ABI Research believes that while Internet video delivery services for TV playback such as gaming consoles are only beginning to see public adoption, these devices, as well as products such as Apple TV, will ultimately create significant pay-content revenue opportunities if consumer platform vendors can provide easy-to-use solutions with good quality and large libraries, while offering attractive pricing options, whether subscription, download-to-own, or