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Subscription video-on-demand is best positioned to help cable operators drive cable profits and attract new digital customers, concludes Jupiter Research in a new report.

Jupiter, noting that SVOD offers cable's "best short-term opportunity for profitability," forecasts that SVOD revenue will grow from $56 million this year to more than $800 million in 2007. In comparison, the traditional, a-la-carte VOD market will jump from $293 million to $1.4 billion during that same time period. Together, VOD and SVOD will grow 58 percent annually, from $349 million this year to $2.2 billion in 2007, Jupiter predicts.

Though VOD has been seen as the cure-all for digital cable, traditional VOD has "experienced the same problems that the pay-per-view market has been riddled with for years," Jupiter Research Senior Analyst Lydia Loizides said, in a statement.

In the near-term, SVOD remains the most lucrative because it's a product differentiator that represents a "predictable and manageable" product that can be marketed to existing digital pay TV subs, Jupiter said.

Premium programmer Starz Encore Group LLC emphasized some of these points by presenting new SVOD research during a panel this week at the Kagan "VOD Summit" in New York.

Starz Encore Vice President of SVOD Greg DePrez said that early subscription video-on-demand research indicates that the service can help cable gain and retain cable operators and drive premium subscriptions. He said California overbuilder Altrio has seen its base of digital customers taking the Starz Super Pak programming package grow 58 percent after bundling it with the Starz On Demand service.

Starz Encore is also testing a form of SVOD with DirecTV customers who own DBS receivers with digital video recording capabilities. In December 2002, DirecTV users participating in the trial watched 3.9 Starz On Demand movies, up from 2.6 in October, DePrez said.

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