MONTEREY, Calif. – The American consumer spend on video on demand content from video distributors will still trail the packaged DVD for another decade, according to research released today.
Kagan Research, in its new study, Video-On-Demand: A Strategic & Economic Analysis, forecasts that U.S. consumer spending on VOD/pay-per-view will be one-quarter the consumer spend on U.S. home video in a decade.
"For years, VOD has been held out as the Next Great Thing and it is steadily fulfilling that promise, but not as fast as some expect," says the Kagan piece.
The company’s study attributes the measured pace to competition from digital video recorders, film distributors enforcing stringent digital rights management of their titles, cable TV’s emphasis on free or flat-rate subscription VOD, and technical constraints related to limited bandwidth.
"Still, U.S. on-demand programming is forecast to grow at a hefty 12% compound annual growth rate (CAGR) over the next decade, reaching US$8.7 billion by 2016. The CAGR for U.S. home video software at consumer spend will be under 3% over the same period, yet on a total dollar basis it still remains much larger," says the release.
The on-demand figures encompass VOD and PPV programs delivered by cable TV, satellite TV and IPTV being rolled out by telephone companies. The figures exclude broadband video that typically does not deliver sharp, full-screen pictures and also excludes handheld devices.
Through the first six months of 2006, Kagan estimates cable TV is the biggest U.S. platform of true-VOD-capable homes with nearly 26.2 million, or 86% of the 30.4 million digital cable households.
Despite all the excitement about marketing TV series, such as "Desperate Housewives," via on-demand, the movie category is still the key for mainstream on-demand programming, added Kagan.
Erotic programming — a niche category that operators mostly avoid talking about — is also a major force that will comprise a nearly $1.6 billion component of on-demand’s $8.7 billion total in 2016. "Such adult fare has sky-high profit margins for channel platforms. However, mainstream fare is growing faster," says the report.
The most surprising development at this stage of on-demand programming is cable operators embracing SVOD, with flat rate pricing for a constantly changing pool of titles, said the release. Sometimes, SVOD is offered as a bonus when buying another premium service.
"SVOD is still inventing itself," notes the report, which projects channel platforms increasingly will offer thematic packages of on-demand programming such as kids, ethnic, adult anime, animation and sports. Cable giant Comcast just launched FearNET, pushing content in the horror genre via multiple platforms. FearNET has already developed a loyal and growing fan base."
