So after years of talking about it and years of speculating about its efficacy, its reach, its opportunity -- VOD is possibly, finally, coming of age. The question is, who will squander the
opportunity first?
The focus, to date, has been on the pay-per-view or subscription model for VOD. Makes sense if you are an old-school thinker. I mean, with estimates floating out there that
put U.S. movie VOD at about $1 billion, who wouldn't be intrigued? But look at it this way: that figure represents less than 4% of the overall home entertainment market (purchases and rentals), which
was estimated at $27.2 billion for 2006.
Now don't get me wrong; $1 billion is nothing to ignore. To date, very few distributors and content owners have embraced the possibilities. But over
the next few years, a confluence of factors will come together that could make this a very attractive market indeed -- especially for cable and other direct-to-consumer distributors. Factors such as:
Rising digital cable penetration and broadband penetration; Growing consumer acceptance/usage of VOD -- both on the TV and the PC; Slowing DVD sales growth and slowing theatrical
revenue; and Increase in usage and overall content streams. At the end of last year, Warner Brothers, Paramount, Lionsgate, Disney, NBC Universal, and 20th Century Fox began a VOD trial
with Comcast in two cities -- Pittsburgh and Denver. They offered movies on demand day-and-date with DVD release. About the same time, Time Warner began testing day and date VOD in Greensboro, N.C.,
while simultaneously trialing a new "virtual video store" of more than 2,000 VOD titles -- about the same as a typical Blockbuster Video store and ten times larger than the typical VOD offering. This
type of strategy is a bit of a no-brainer. What I want to think about is the opportunity from the consumer's point of view on free VOD. So let's look at the numbers for a minute:
Digital
cable penetration was estimated to be 50% nationally at the end of Q4 2006, with 84% of those households having access to VOD. In December 2006, Comcast alone delivered 180 million streams of
VOD programming to its footprint. According to its public announcements, Comcast said that 70% of enabled digital subscribers use VOD, with users viewing it an average of 27 times per month, or
approximately once per day. Other interesting tidbits of information include:
For the full year 2006, Comcast delivered 1.9 billion VOD streams, up 70% from a year earlier. Comcast
currently offers viewers over 8,000 program choices, including 800+ movies, 300 of which are free. Comcast estimates that 95% of its total on-demand content is free. About 11% of VOD streams
(20 million) were movies in December 2006. I have yet to understand why the industry has been unable to move the needle on this opportunity. Yes, yes -- tracking, uploading, pitching,
catching, blah, blah, blah -- all excuses. Let's just commit to getting it done. Marketers are waiting.