Forrester Research made a bold prediction recently based on a survey of consumer interest in paid video downloads. While the study indicates that revenue from video download sources such as iTunes, CinemaNow and Movielink, and those offered by Wal-Mart, Microsoft and Amazon will generate $279 million this year compared to $98 million last year, 2007 will be the peak and it’s all downhill from there.

The survey indicated that only nine percent of online adults have ever paid for download a movie or TV show, and that the ones who have done so are a “niche of media junkies” who aren’t representative of the mainstream.

In a bold statement, Forrester predicts the extinction of the paid video download market, and suggests that Apple will need to rethink Apple TV. The model that will win, according to the analyst, is ad-supported content. In addition, they say, movie studios, whose content only makes up a fraction of today’s paid downloads, will put their weight behind subscription models that imitate premium cable channel services.

The report says implications include a shift toward putting videos from the internet directly on the TV (that’s not news), partly owing to developments from Cisco and Motorola that result in Internet-friendly set-top boxes delivering ad-supported content (that’s somewhat news and we’ll see how well they fare).

Another likely result, they say, is television networks allowing ad-supported downloads of prime-time TV shows. New technology such as the recently announced Adobe Media Player will allow consumers to download video for playback without losing the ads that were sold with the video.

And, if Forrester has it right, we can expect streaming of ad-supported TV shows to eclipse DVR use by the end of 2008. (Really??) Forrester says this pleases both advertisers and networks because this shift thwarts ad-skipping. And Forrester believes consumers will appreciate the fact that it’s it’s cheaper than a DVR and is more flexible.

Our take: until they make TV commercials more worthwhile (how many people have developed “possibly major medical side effects” JUST from listening to listings of symptoms twenty times a day??), consumers will adopt ways to bypass ads, even if it just means leaving the room.