Dire warnings for VOD vendors. It's not the video rental or box office markets that will fund the service, a Jupiter Media Metrix study says. Instead, VOD revenue will come primarily from the pay-per-view audience. And studios, operators, cable networks and the rental market had better adjust or face a faltering iTV advancement.
According to iTV and Video on Demand: Appraising the Value of Movies on an Interactive Platform, the VOD market will top $641.9 million by 2006. It's urging studios to work directly with cable and satellite operators, rather than limit talks to iNDemand, Starz Encore and Intertainer.
"The greatest value lies in shifting the pay-per-view audience to VOD and generating incremental revenue," says analyst Lydia Loizides. "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."
Other findings show 28 percent of U.S. online consumers are interested in VOD services, but demand hasn't translated into provision.
About 45 percent of total online users rent videos at least once a month, but only six percent use pay-per-view in that time. VOD's easy use and its deployment of services, pricing and marketing will up usage in the long term, Jupiter says.
Only 9 percent of consumers will purchase or upgrade a cable product in the next year, compared with 8 percent who would buy or upgrade a VCR, and 16 percent who plan to buy or upgrade a DVD player.
Finally, Jupiter says seven key point will directly affect VOD market growth: infrastructure, asset ownership, licensing, pricing, marketing, industry influencers and consumers' demand.