Report: On-Demand Revenue in U.S. to Top $6 Billion in Five Years

MONTEREY,
December 14: A new study from SNL Kagan estimates that total revenues
from video on demand, pay per view and near video on demand generated by
multichannel service providers in the U.S. will top $6 billion within five
years.

The projected $6 billion revenue for on-demand services in
the U.S. covers cable, satellite and telco video offerings, with major
contributions coming from the adult and event pay-per-view sectors.

The SNL
Kagan report, entitled Video-On-Demand: A Strategic and Economic
Analysis, expects on-demand services to
evolve from value-added elements designed for increased customer satisfaction
to significant sources of revenue. VOD advertising is also a promising revenue
generator, with executives at VOD-based channels witnessing great demand from
sponsorship revenue. Since 95 percent of all VOD content is free, sponsorship
revenue is becoming an increasingly important financial factor. SNL Kagan
expects the market to evolve gradually into a cost-per-thousand-viewers model.
On-demand ARPU is expected to top $5 per month in 2010 and $6.56 per
month—or nearly $79 annually—in the 10-year outlook.

Growth in the on-demand segment will rely heavily on the
ability of operators to expand the breadth and depth of the offerings by
increasing the reach and capacity of their networks. According to SNL Kagan,
digital video is not only a competitive necessity for cable operators, but it
also provides the foundation for future revenue growth. When combined with
telco video services, SNL Kagan projects that the combined installed base of
digital cable and telco video set-top boxes will top 110 million by 2011.

"We’re starting to see factors align that can enable
operators to translate the rise in on-demand traffic into more significant
sales," said Ian Olgeirson, a senior analyst for SNL Kagan.

—By Irene Lew