Subscriptions Key To Video On-Demand, Says Jupiter

The Impact Of On-Demand Content On Cable Revenues In The US report shows that in addition subscription VOD – dubbed SVOD – will reach $800 million in 2007, up from just $56 million this year. Combined, the total on-demand market will therefore grow by 58% annually, from $349 million in 2003 to £2.2 billion in 2007.

For comparison, Yankee Group forecasts of the same market, compiled in October last year (see Cable Operators Throw Weight Behind VOD), are included below.

VOD Revenue Forecasts ($ billion)
Year	2002	2003	2004	2005	2006
Video-On-Demand	0.14	0.36	0.76	1.35	2.10
Subscription Video-On-Demand	0.02	0.10	0.39	0.55	0.70
Total	0.16	0.46	1.15	1.90	2.80
Source: The Yankee Group, October 2002

The subscription model For cable operators, VOD has been seen as a key new source of revenue, but this has so far failed to emerge.

“Cable operators believed the on-demand system of content delivery to be the panacea of digital cable. But as products were launched and as consumer buying habits stabilised, VOD à-la-carte experienced the same problems that the pay per view market has been riddled with for years,” says Lydia Loizides, senior analyst at Jupiter Research.

“Subscription VOD services are predictable both in price and content and are marketed in a way that the consumer understands. On-demand technology is not reason enough to purchase more content. Consumers are still driven toward programming first and foremost on the television platform, regardless of whether or not that platform is analogue or digital,” she continued.

Accordingly, Jupiter believes that SVOD services will remain the most lucrative in the near term because consumers understand and lean toward stable pricing. “SVOD offerings require no new capital expenditure and networks can readily repackage content and bundle on-demand services with basic or premium cable offerings within the digital tier only,” says the report.