Video on Demand Taking Its Share

A pair of studies shows video on demand (VoD) is beginning to make headway, with IPTV a key factor in the service’s popularity.

ABI Research reports VoD will start to make an impact on television programming within five years, a move that will trump traditional TV scheduling as people choose their own times to watch a movie.

“Movies shown on a schedule won’t interest consumers much because they’ll be able to go to a VoD portal at any time and pick out any movie that’s ever been made,” Michael Arden, ABI Research principal analyst of broadband and residential entertainment technologies, said in a statement.

VoD’s success, currently the domain of satellite and cable operators, will depend on the rollout of IPTV, the broadband service that’s just beginning to gather steam among incumbent telephone carriers like Verizon and SBC .

While the ABI Research report notes IPTV will be a key factor in VoD’s growth, the Baby Bells will need to upgrade their older DSL and fiber-to-the-home (FTTH) networks.

SBC late last year accelerated its fiber rollout plans after the Federal Communications Commission (FCC) ruled not to regulate the price Bells could charge to competitors who want to use the fiber for their own services.

Verizon has pledged $3 billion to roll out fiber in the next two years.

IPTV service, and VoD by extension, should begin to pick up soon. Last week, Texas became the first state in the U.S. to waive the requirement that forces Bells to sign franchise agreements with individual communities.

While the Texas law is controversial, telecom carriers say they will now be able to provide television service much quicker in the state.

Despite infrastructure concerns among the Bells, cable operators are seeing dramatic growth in the number of VoD users, reports market research firm In-Stat.

At the end of 2004, there were 7.5 million cable-based VoD users worldwide, a number that’s expected to grow to 13 million by the end of the year and 34 million in 2009.

Cable companies, according to a report published by the firm Wednesday, are looking at free-on-demand (FoD) as a way to differentiate their service from satellite operators. The research notes that while there has been a 55 percent increase in VoD revenues from 2003 to 2004, revenues continue to lag behind user growth as FoD becomes more popular.

In-Stat reports 25 percent of all U.S. cable TV subscribers have tried VoD. The cost to deliver VoD, in equipment and network operations costs, has dropped from $300 per video stream to $250 from mid-2004 to mid-2005.

ABI Research indicates operators are looking to cut costs even further by purchasing production companies to create their own content, “because they want to be able to control the way content is produced, and they can cut out the middleman to maximize revenue,” Arden stated.

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