Cable Operators Throw Weight Behind VOD

The report, Video-on-Demand: Sustained MSO Commitment Drives Rapid Growth, claims that the leading cable operators have been swift to deploy VOD for three reasons: to differentiate their service from direct broadcast satellite (DBS) services, to improve the value proposition for digital cable and to generate incremental revenue from their upgraded networks.

As penetration levels increase and content becomes more widely available, cable multi-system operators (MSOs) will look to develop the medium still further. They are already looking into the options offered by network-based personal video recorder (nVPR) services and adding a wider range of programming to their VOD menus.

“Despite falling stock prices and pressure from Wall Street, most major MSOs have continued to deploy VOD,” said Adi Kishore, Yankee Group Media & Entertainment Strategies analyst. “With content availability growing and VOD technology maturing, the supply side hurdles are largely resolved. MSOs must now shift their focus to the demand side and concentrate on marketing and consumer education to drive usage.”

The study also surmised that VOD had the potential to eat into video rental revenues in the next few years. However, rental stores will continue to have the advantage of early access to new releases from the major studios.

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