• by Joe Mandese  @mp_joemandese, May 1, 2006

As it prepares to begin integrating time-shifted ratings from video-on-demand services into its national and local TV audience estimates, Nielsen Media Research is encountering a surprising development: As VOD penetration grows, its relative contribution to TV viewing appears to have leveled off and may even be declining, according to a new report released to clients last week.

While VOD ratings have grown a whopping 600 percent in the 28-months since Nielsen began tracking it - jumping from a 0.03 percent of U.S. TV usage in September 2003 to 0.21 percent in December 2005, the last month it has reported - the most recent rating is down from the summer when VOD usage hit a high of 0.23 percent of U.S. TV usage.

The report, one of two papers released last week on the effects of time-shifted viewing from VOD and digital video recorders, is a more detailed analysis of an updated provided to clients by Nielsen during a national meeting in Orlando in March. It concludes that much of the gain in the national VOD rating over the past 28 months can be "attributed to increased accessibility, but the increased and improved program offerings were likely a contributing factor."

The report also seems to suggest that VOD is a bigger factor in certain dayparts (such as late night and prime-time), during certain days of the week, and among specific demographics (especially children and young adults). The highest VOD - rating a 0.16 - occurs among adults 18-34 watching late night programming on weekdays. The next highest rating is among persons 12-17 in prime-time. Kids 2-11 averaged a 0.11 rating during prime access.

"Fourteen percent of VOD tuning came from 2- to 11-year-olds, but only 12 percent was from persons 55-plus. The older demo accounted for 32% percent of linear tuning," wrote Steve McGowan, senior vice president-client research initiatives, the Nielsen executive who authored the report. "In the key 18-34 demo, they accounted for 35 percent of all VOD minutes, but only 19 percent of linear minutes.

While most viewing in VOD households occurs in "linear" mode - meaning in real-time when viewers are unlikely to fast-forward through TV commercials - there is also some promising upside, because VOD users tend to watch more TV overall.

"For the last half of 2005, weekly VOD users averaged nearly 84 hours of linear use, far more than the 59 hours for VOD-accessible homes that did not use the service," wrote McGowan.