Report: U.S. On-Demand Revenues to Reach $10 Billion by 2014

SCOTTSDALE: On-demand viewing of TV programs and movies is expected to generate $10 billion in the U.S. in annual revenue by 2014, according to new data from In-Stat, as revenues from retail video disc sales and rentals continue to decline.

In-Stat predicts three growing on-demand video revenue streams. The first is transactional VOD (T-VOD), which includes online TV rentals, pay-TV VOD rentals and pay-per-view. The second is subscription VOD (S-VOD), covering online video subscription services, premium TV channels and free VOD with a pay-TV service. The third area of growth is electronic sell-through (EST), which will hinge primarily on the buy verses rent decision. While EST may not replace retail DVD video sales, the migration of DVD rentals to online T-VOD services will fill the revenue gap. S-VOD is expected to see the highest growth rate, but will also likely face the most competition.

“The transition to on-demand video does not mean that linear TV is coming to an end,” said Keith Nissen, principal analyst at In-Stat. “What we are seeing is the economics of the digital entertainment world have begun to shift. The future will be a hybrid ecosystem, made up of both linear TV and on-demand video revenue streams. Pay-TV and broadcast TV services still generate the majority of the revenue, but both business models are currently under stress. On-demand viewing of video content, whether by transaction or subscription, is taking hold. In order to ensure the continuation of existing revenue streams, new value propositions must be created.”