VOD Faces Stiff Competition From Existing Video Market, Says eMarketer
A new report from eMarketer analyses potential future growth in the video on demand (VOD) market. Despite the obvious attractive consumer benefits of VOD, eMarketer points out that the service faces some serious competition in the shape of the nascent personal video recorder (PVRs) market, the existing home video market and from the growing DVD market.
Estimates of future DVD revenues vary greatly according to a compilation by eMarketer. Jupiter believes that VOD will generate only $278 million in revenue by 2005 whilst Kagan World Media believes the figure will be $3,010 million.
| Comparative US Video On Demand Revenue Estimates ($ million) | |||||
| 2001 | 2002 | 2003 | 2004 | 2005 | |
| Kagan World Media | 120 | 490 | 1040 | 1950 | 3010 |
| Yankee Group | 70 | 420 | 970 | 1430 | 1980 |
| Cahners In-Stat | 86 | 1750 | |||
| Jupiter Media Metrix | 16 | 34 | 61 | 113 | 278 |
| * North America only ** Movies only | |||||
| Source: eMarketer, 14 March 2002 (all forecasts from 2001) | |||||
The key for providers offering VOD, says eMarketer, is finding the right price point that will make the service both attractive to consumers and also profitable at the same time. A survey by Accenture found that the consumer segments most interested in iTV services were willing to pay a $1.50-$3.00 premium over video store rentals for VOD. Jupiter found that 28% of US online consumers are interested in buying VOD-type services from their satellite or cable company.
Screen Digest forecasts that by 2005 26m households worldwide will be using VOD services across the world (see 26 Million Will Have Video On Demand By 2006, Says Screen Digest). By 2005, Screen Digest forecasts that the UK will have 1.2 million users.
Frost & Sullivan believes that video on demand services will reach more than 8.5 million people across Europe and generate revenue of up to $2.5 billion by 2006 (see Forecasts).
VOD services, says eMarketer, are a must for cable companies primarily to prevent churn to satellite TV providers. The report states “Many industry analysts point to the fact that cable companies will have an advantage over satellite TV companies in the provision of interactive TV services because of the high-speed return path. This supposed advantage however, has yet to be realisedÂ… and may never be.”