Video on Demand
10 May 2004
Video on Demand (VOD) enables subscribers to choose from a library of recorded films and TV programming, and watch them immediately on their TV set, usually via a set-top box. It is analogous to having an ‘online video or DVD store’. Most versions allow the user to pause, rewind or fast forward the programme. The customer pays a small fee to watch each programme, and has access for a limited time period, often 24 hours. Unlike conventional broadcast TV, content is requested by the viewer, hence the service is ‘on demand’.
This profile focuses on VOD over DSL or fibre networks, although some examples of VOD over cable are included. After several damaging false starts, VOD over DSL is beginning to look like a viable proposition, at least where market conditions are favourable. Point Topic estimates that as of May 2004 there were at least 230,000 DSL and fibre subscribers worldwide with access to true VOD. Many operators are now pushing forward with ambitious rollout plans which should take subscriber numbers over 1 million within 12 months.
Reasons for the improving outlook include:
• Sharp falls in the initial capex per end-user required to set up VOD service
• Improved DSLAM and network technology allowing more efficient and cost-effective distribution of video content
• Lower backhaul bandwidth costs
• Greater willingness by the film studios to agree content deals
• Positive feedback from the users of existing services, who prove to like VOD, are tending to increase their use of it, and are les likely to churn to other service providers when they already have VOD.
Taking these factors into account, business plans for VOD can expect reasonably early break-even rather than a long period of heavy losses. Operators are starting to consider the possibility that a VOD offering might become an essential part of every broadband portfolio rather than an expensive luxury.
VOD over cable raises different issues,