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Report: Lukewarm VOD Interest

20 Feb, 2008 By: Erik Gruenwedel

Consumer interest in video-on-demand (VOD) apparently is tepid despite aggressive efforts by cable operators and studios to jumpstart the distribution channel.

A new study from Forrester Research Inc. found the number of cable households utilizing VOD in 2007 increased just 2%, to 15% of the total, and the format generated a paltry 3% of total weekly minutes viewed.

By comparison, 64% of weekly viewing favored broadcast television and 21% opted for rental and sellthrough DVD.

Led by Comcast Communications and Time Warner Cable, cable operators together with major studios — notably Warner Bros. — have been testing same-day VOD and DVD new movie releases in Denver and Pittsburgh.

The move is aimed at capturing a significant share and margins of the rental business without cannibalizing lucrative sellthrough. With the exception of Warner, most studios and media companies involved have declared the results inconclusive.

Lionsgate president and co-COO Steve Beeks told analysts last week the industry wanted a clearer view on the impact to DVD before going forward.

“It is too early to say exactly what we are going to do,” Beeks said.

The studio might have been responding to Forrester data that showed sales of pay-per-view movies declined 11% in 2007, to 56%, from 67% in 2006, and that subscription VOD fell 2% to 34%.

Only free VOD, which included next-day prime-time TV programming, increased 12% from 46% in 2006 to 58% last year.

Indeed, 50% of VOD viewers watch five or fewer VOD programs monthly, while 11% watch more than 10 programs — up from 7% in 2006.

Principle competitor to VOD is the digital video recorder (DVR), which the report said generated three times the usage as VOD. Ongoing efforts to expand Web-based VOD continue to gain traction, according to the report.

“2007 should have been a good year for VOD,” wrote analyst James McQuivey in the report. “TV service providers have 2008 in which to finally make VOD content easier to find and more satisfying to watch — or must step aside and watch players like Hulu and iTunes walk away with the market.”

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