Report: Broadband Deployment Will Fuel VOD5 Jun, 2002 By: Holly J. Wagner
Video-on-Demand (VOD) services over Internet Protocol (IP) networks will grow to a total of more than 17 million users generating over $1.9 billion in subscription and pay-per-view revenue during 2006, according to a new study from In-Stat/MDR.
As consumer-oriented VOD services over IP become more pervasive, revenue from family-oriented
"Consumers who have broadband Internet connections represent a strong growth market for VOD services," said Gerry Kaufhold, a principal analyst with In-Stat/MDR. "Adult content Internet VOD services are way ahead of cable TV VOD deployments in terms of total subscribers and revenues. However, four new family-oriented VOD-over-IP service efforts are underway: CinemaNow, Intertainer, MovieLink, and Movies.com.”
By 2006, about 40 percent of worldwide consumers who have high-speed Internet connections to their homes will be using "on demand" services for which they pay monthly fees, bringing $1.9 billion to Hollywood, according to the report "Consumer Oriented Video-On-Demand Via IP Networks”.
VOD services will eventually surpass those of the adult content sites that dominate today's VOD-over-IP market, the report concludes.
But those projections seem optimistic given that only two of the four services mentioned – Intertainer and CinemaNow – are live to date. Growing CinemaNow has deployments in North America, Taiwan, and Singapore. Intertainer is rolling out its service in 35 major U.S. cities that have strong broadband deployments in place. The other two services, backed by the major movie studios, have been mired in delays and have yet to raise the curtain.
"Several million movie streams per month are currently being served up for free, but as the major movie studios enter the fray, with premium movie titles, pay-per-view and subscription services will gain traction, helping Hollywood figure out what the market is for 'on demand' content, and help engineers and software programmers to develop efficient delivery systems and workable Digital Rights Management solutions," said Kaufhold.
Slated to generate approximately $460 million worldwide in 2002, the adult content segment of the market (representing more than 98 percent of revenues) will serve as a barometer for the future success of the market as a whole, Kaufhold believes.
By the end of 2004, the number of subscribers and pay-per-view participants regularly using family-oriented "on demand" IP services will outnumber adult content service users and by 2006, family-oriented "on demand" services will overtake the adult content sites in terms of annual revenues, Kaufhold posits.
Among other findings in the report, Kaufhold notes that the North American market has the lion's share of consumer broadband connections deployed and by 2006, will represent over 7.6 million VOD users, generating over $820 million in revenues. That's good news for U.S. VOD providers, as the European Union is reviewing a complex plan to tax Internet commerce from outside the EU at rates applied in the country in which each download takes place.
Asia, especially South Korea, Taiwan, Singapore, and others, will represent about 37 percent of worldwide VOD-over-IP subscribers by 2006, producing over $700 million for movie studios. Europe will provide about 15 percent of worldwide VOD-over-IP revenues in 2006, and the Rest-of-the-World will bring in about 4.7 percent.
Video rental stores won't go away, Kaufhold believes, but VOD services from Cable TV, Satellite TV services, and digital terrestrial datacasting services will all add momentum to the "on demand" market.