NPD: Pay-TV Transactional VOD Declines 12%16 Feb, 2012 By: Erik Gruenwedel
The number of people watching transactional video-on-demand (rentals) of movies, TV shows and sports on cable and satellite TV dropped 12% during a 12-month period through August 2011, compared with same period in the previous year, according to data from The NPD Group.
Specifically, that includes people who are now accessing transactional VOD content from the Internet instead of pay-TV.
The Port Washington, N.Y.-based research company said the transactional VOD movie-rental market on pay-TV reached $1.3 billion in revenue during the period despite the fact that there were 4 million fewer VOD transactions compared to the previous period. By comparison, sales of Blu-ray Disc movies reached $2 billion in 2011, according to DEG: The Digital Entertainment Group.
Transactional VOD has been heralded by studios for its higher margins than traditional brick-and-mortar video rentals, $1 kiosks and subscription VOD. As sellthrough began to taper, studios — led by Warner Home Video — began offering new releases on transactional VOD day-and-date with disc.
NPD said there were 40 million transactional VOD purchases via cable, satellite TV and fiber-optic providers, which represented 15% of consumers aged 13 and older. By comparison, there were 7 million Internet-based transactional VOD purchases generating $204 million in revenue during the period, which represented 16% of the entire transactional VOD movie market. Web-based transactional VOD includes iTunes, Amazon Instant Video and Walmart’s Vudu, among other services.
“The challenge for pay-TV operators is that there is significant overlap between iVOD and pay-TV VOD movie usage,” said Russ Crupnick, SVP of industry analysis for The NPD Group. “This overlap is expected to expand — possibly cutting deeply into pay-TV VOD movie revenues — as growth in consumers’ use of Apple’s iTunes, Vudu and other services expands to new connected devices in the home, and as iVOD interfaces become easier to use.”
Nonetheless, Crupnick said cable and satellite TV remain the most convenient way for the average consumer to purchase transactional VOD content using the remote and paying for it through the monthly pay-TV bill. But with increased consumption of entertainment through the Internet, 12% of them opted not to watch TV programs, news and sports on pay-TV between August 2010 and August 2011.
According to NPD, users perceive watching iVOD movies to be a better value than watching movies on pay-TV VOD. Users also have a more favorable perception of iVOD, when it comes to available movie-title selections.
“iVOD distributors are effectively using CRM, free trials and other promotions to gain trial usage of their services by new customers,” Crupnick said. “With this new competition eating away at revenues, pay-TV operators need to be equally aggressive with promotions, in order to instill a habit of movie buying among their subscribers.”