If you own an Xbox 360 or a PlayStation 3, there's a good chance you've checked out the wide variety of film, TV and other video content available for download on Xbox Live Marketplace and PlayStation Network. There's also a good chance you've paid to download one or more videos in recent months, and that's a trend that the market researchers at TDG (The Diffusion Group) expect to continue in the years ahead.

A new report from TDG positions the Xbox 360 and PS3 as "multimedia gateways with legitimate non-gaming media arsenals." With growing video libraries, TDG sees consoles challenging local cable or satellite TV operators for control of the evolving on-demand video market.

Backing up its claim, TDG notes that by 2012, around 190 million households will use a next-generation game console and 80 percent of these households will have the console hooked up to the web. Looking at these console-connected households, about 75 percent (which is over 110 million) are expected to use console-based video services at least a couple times each week.

"There is a bit of a 'value vacuum' developing around today's PayTV offerings," commented Colin Dixon, TDG's practice manager for broadband media and report co-author. "Rising dissatisfaction with service value, the lack of flexibility implicit in tiered strategies, and a growing interest in watching online video on the TV have combined to create a unique opportunity for alternative video services – an opportunity not at all lost on console vendors."

He continued, "Microsoft and Sony know that today's console gamers are perfectly suited for new TV offerings. The segment is dominated by males between the ages of 18 and 35 – a prized advertising demographic – with little sense of loyalty to their 'local' cable or telephone company. They are also heavy viewers of online video and quite comfortable spending money for online digital media. Simply stated, console vendors are inimitably positioned for success in the OTT space because (1) their gaming audience already owns the enabling device, and (2) they are highly likely to already have an Internet-to-TV relationship with the vendor."