Video-on-Demand on the Rise

Video-on-Demand (VOD), long one of the cable industry's holy grails, is increasingly becoming a reality.

A service that allows subscribers to whatever they want, whenever they want, VOD is now available through approximately 40% of all US cable TV systems. By midsummer, almost four million cable TV subscribers were "regularly using the service to watch movies, packaged premium programming, and even 'free' shows and events," according to an August 19 report, Cable TV Operators Broaden the Reach of VOD, from the technology market research firm In-Stat/MDR.

VOD is primarily a North American phenomenon, with only a few cable services offering it elsewhere. It's a growth business, however—researchers project that there will be five million users by the end of this year, with the worldwide market penetration to hit almost 14 million in 2007. Consumer awareness of VOD is exceptionally high, given its relatively recent arrival on most folk's tech radar. In-Stat/MDR claims that 70% of surveyed households were familiar with VOD, a much higher percentage than are aware of high-definition television or digital satellite radio.

Even so, only about 10% of cable subscribers opt for VOD. The service's biggest competitors are DVD players and hard-drive-based Personal Video Recorders (PVRs). PVRs continue to gain in popularity, and are being incorporated into many new versions of consumer video gear, including set-top converter boxes, satellite receivers, and some new high-definition TV tuners.

Cable providers are offering all sorts of clever inducements to get consumers to try the service, which is still a money-losing operation, according to Mike Paxton, In-Stat/MDR senior analyst. "Even as the cost of provisioning VOD is decreasing, there is still concern about the best way to monetize the service," Paxton stated. At present, many cable providers see VOD as a loss leader helping to differentiate their industry from satellite television services, he added.

In-Stat/MDR's full report is priced at $2,795US and is available through Erin McKeighan of Reed Business Information.