• by Wayne Friedman , January 11, 2006

Think all consumers are dying to spend $1.99 a download for their favorite TV shows? Think again.

New research suggests that consumers, almost three to one, would rather see commercials than pay a fee--$1.99 a download, the fee that has become the standard after a flurry of recent video-on-demand deals. The study comes from research companies, Points North Group and Horowitz Associates, who did a telephone survey of 800 people last November.

The question asked of respondents: If you missed your favorite TV show and wanted to watch it afterwards, would you pay $1.99 or have it free with commercials?" Overall, 62 percent said they would rather have commercials than pay $1.99. Seventeen percent said they would pay the download fee, and 21 percent were undecided.

Opposition to paying a fee is even stronger with younger adults, says the survey. Consumers 18-34 prefer free, ad-supported content 68 percent of the time--as compared to 26 percent, who prefer to pay a fee. Five percent of those consumers were undecided.

To some analysts, this indicates that video downloads have limited appeal. "It will be a good novelty," says Craig Leddy, an analyst of Points North Group. "They'll burn out over $1.99 downloads. Their credit card bills will add up."

This research is good news for advertisers--as they could be more involved with VOD content, said Leddy. Still, he adds that VOD deals will need to be careful. "Unless the advertising is short and sweet, it won't work in the VOD environment."

In the flurry of VOD deals that have been announced by major media companies, only one deal has been structured in which consumers could download with no fee, but with commercials--that of Time Warner and AOL. Time Warner said it would put its classic TV library online on AOL, its broad-based Internet company, free with commercials.

New VOD deals should take note of existing VOD services that have been up and running for some time, says Leddy. "Cable operators have wanted to keep it as free as possible," he said. "Even then, the business has been pretty slow going."

Historically, research shows traditional cable pay-TV and advertising-supported TV models have more stable economics than VOD-type deals, said Leddy. VOD deals have been compared with older pay-per-view service, which is an unstable economic model.

"With pay-per-view, you don't know what is going to happen from day to day," said Leddy.