VOD Must Stick to TV

The market for video-on-demand (VOD) will grow to $641.9 million by 2006, according to Jupiter Media Metrix, but it must focus on the TV as its delivery platform, not the PC.

When a Jupiter survey that asked about movie-related activities online found that only 11 percent of consumers said that they were interested in viewing movies online. Thirty-one percent of respondents said that the Internet was too slow to allow them to watch video. The platform and audience for VOD will have to come from television. The pay-per-view audience is the most attractive.

“The industry heralded VOD as the entertainment technology that would unseat the VCR from the home and obliterate the video rental market — that’s unrealistic,” said Lydia Loizides, Jupiter analyst. “The greatest value lies in shifting the pay-per-view audience to VOD and generating incremental revenues. Studios, operators, cable networks and the rental market must prepare to counter the effects, both positive and negative, of VOD on their businesses. Failure to do this will result in another blow to the advancement of interactive television.”

Forty-five percent of total online users rent a video at least once a month, according to Jupiter. Only six percent order a pay-per-view movie or event in the same time period. But Jupiter analysts believe that although VOD’s ease of use coupled with deployment of services, pricing and marketing will lead to greater usage over the long term.

A Jupiter consumer survey found that 28 percent of U.S. online consumers are interested in buying VOD-type services from their satellite or cable company. However, while consumers may have expressed demand for additional services, the findings indicate that fulfillment of that desire remained modest. When Jupiter asked consumers whether or not they expected to purchase or upgrade their cable product, only 9 percent said that they were likely to do so over the next year. Eight percent said that they would upgrade or buy a new VCR and 16 percent said the same of a DVD player. This moderate rate of upgrading existing entertainment technologies in the home could also keep VOD adoption down.

The Home Technology Monitor from Knowledge Networks/Statistical Research (KN/SRI) found that the relationship between computers, the Internet and television is one of parallel growth, not mutual exclusion. Compared to those with no computers, homes with two or more PCs are about twice as likely to have rented a VHS tape in the past month (64 percent vs. 34 percent) and to be paying $50 or more per month for cable/satellite service (31 percent vs. 15 percent).

In addition, past-month pay-per-view purchase is more than three times higher in multiple-PC homes (14 percent vs. 4 percent).

Homes with Internet access are 50 percent more likely to have rented a VHS tape in the past month (57 percent vs. 37 percent) than non-Internet homes, and they are nearly twice as likely to be paying premium prices for cable service (25 percent vs. 15 percent). It will be interesting if this prohibits such homes from spending on VOD, or if it gives them more incentive to do so.

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