European Video On-Demand To Reach 8.5m People By 2006
Video on-demand services (VOD) will reach more than 8.5 million people across Europe and generate revenue of up to $2.5 billion by 2006, according to analysts at marketing research firm, Frost & Sullivan.
VOD allows uses to begin watching television programmes – typically films – whenever they wish; it also allows them to pause, rewind and fast-forward programmes at will. So far, the development of VOD services in Europe has lagged behind that of the US. During the last quarter of 2000, Video Networks launched VOD commercially in the UK, although audiences remain limited. However, tentative moves are being made to propel the market into growth, says F&S.
Last month, hardware producer, Pace Microtechnology, and interactive television (iTV) operator, Open, announced an alliance to develop high-end digital cable technology worldwide (see Forecasts); this would include VOD services.
As the price of set-top boxes and the cost of bandwidth technology plummet, network operators are able to launch viable business models for VOD which will result in the service becoming affordable to the average consumer in the mass market, says the F&S report.
“Interest in the technology will initially expand at a sluggish pace, on a par with the development of subscription levels, but rapid growth will ensue as a result of the expected escalation in the overall subscriber base and average revenue per subscriber. We believe that the number of VOD subscribers will rise in tandem with home broadband access,” says Niamh Spillane, research analyst at F&S.
VOD market take-off in Europe will be a boon for companies providing digital subscriber line and cable modem services, says the report.
There are still a number of obstacles to be overcome if the VOD market is to really begin to take off. The protracted process of local loop unbundling (the opening up of BT’s telephone lines to other telecommunications companies) and the negotiations over revenue sharing between content providers and network operators continue to thwart a full-scale roll-out.
The study adds that in every European country, there is at least one telco or cable operator with serious plans for deployment within the next two years. VOD services are forecast to be launched in Spain, the Netherlands and Portugal throughout 2002. Germany and Scandinavia will follow in 2003, with France and Belgium deploying the technology in 2004.
The major incumbents who have announced concrete plans include Telefonica, KPN, Deutsche Telekom, Telia and Telenor. Key cable players include NTL, UPC, Callahan and Telewest.
“The increasingly competitive nature of the television market will force TV broadcasters to seek out attractive programming options that will supply them with more kudos. The emergence of VOD presents yet another option for consumers in their choice among terrestrial, cable and satellite TV, as well as allowing broadcasters to build up subscribers by providing a complete home entertainment service,” reads the report.
Frost claims that ancillary revenues achieved through television commerce (t-commerce), targeted advertising and sales targeted directly to individual subscribers will boost the popularity of interactive digital television and advanced cable services.
Spillane adds: “The breadth of content availability will enable advertisers to target certain content at individual consumers based on their respective requirements and usage patterns. The spectrum of content across Europe, for example, will differ greatly from that in the US due to inclusion of multiple languages and locally produced material in domestic languages.”
Separate research from the Yankee Group claims that VOD in the US will be worth $1.98 billion by 2005 (see Forecasts).