• by Aaron Baar , March 6, 2013

Cable companies continue to dominate the $1.3 billion transactional video-on-demand movie rental market, but telecom companies such as Verizon and AT&T are beginning to make gains. 

According to research firm The NPD Group, cable operators accounted for more than half of the multichannel video programming distributor (MVPD) on-demand market, followed by satellite TV companies (27%) and telecom operators (18%) in 2012. These shares, however, represent a 4% decline for cable operators, a 1% increase for satellite operators and a 4% increase for the telecom companies. 

“The telecom video-on-demand customer is a bit more technology engaged [with devices such as smartphones and tablets] than the average cable customer so there might be a natural tendency for those folks to adopt a bit more quickly,” Russ Crupnick, senior vice president of industry analysis for NPD, tells Marketing Daily. “[Also}, customer feedback in terms of perceptions about selection, availability of current movies, site organization and navigation tends to be somewhat higher [among telecom companies] than cable as a whole.”

On an individual basis, however, some of the cable operators (such as Comcast) do score as well among consumers for VOD services as the telecom companies, Crupnick says. For the study, NPD only measured movies for which a separate per-movie-rental fee is charged, as opposed to movies that may come as part of a premium subscription, such as HBO or Comcast’s Streampix. 

In addition to growing their overall share, telecom companies also generated more rental per subscriber for video-on-demand rentals than cable TV operators. According to NPD’s estimates, telecom companies earned an average per-subscriber revenue of $25.29, while cable TV operators averaged $13.83 per subscriber. Satellite companies such as DirecTV and Dish network netted an average $10.33. 

Despite those earnings, television service providers have some hurdles to overcome to make paid video-on-demand services a big portion of their customer-derived revenues, Crupnick says. 

“One of the enduring themes we see, and this is across most providers, is paid movie VOD rentals are not seen as providing good value for the price,” he says. “It’s not clear whether this is an actual price point problem or an issue with some who pay $100 for service having to pay another $4 or $5 for a movie rental.”

"Watching TV photo from Shutterstock"