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VOD Economics: Are We There Yet?

If your audience closes a door, it’s time to open a window – a content release window, that is. According to BTIG analyst Richard Greenfield (reported by Ryan Lawler at NewTeeVee), release windows are shrinking rapidly, with most movies available through Video-on-Demand within days of their DVD debuts. There are several reasons for this, including a wider consumer shift away from physical media, and greater comfort on the studios’ part with digital delivery. But the upshot is that the economics of video delivery are finally shifting in favor of VOD.

VOD services should be the bedrock of pay-TV subscriptions. Along with live sports, VOD has the potential to deliver the most value both to consumers and service providers. Viewers get the shows they want when they want them – you know, like the Internet, but on your big-screen TV – and providers get engaged customers they can target with money-making ads, promos, and even new services. Somehow, though, that isn’t quite how it’s worked out. The challenges have been significant, including the need for more network capacity, the problem of separate guides for VOD and linear TV, and the difficulty of negotiating broader content licensing rights. When it comes down to it, money has been a serious gating factor. Luckily, it’s also the variable that will finally push VOD to live up to its potential.

The collapse of release windows is one sign that economics are now working for the VOD model. Another sign is the increasingly competitive environment for providers who find they have to invest in greater network capacity to ward off rivals. The same is true with program guides. Although the guide problem isn’t fixed yet, operators have widely acknowledged that it has to be a top priority for them if they want to stay competitive.

All in all, money appears to be tipping the scales toward VOD in 2010. It’s about time.

2 Responses

  1. […] online TV guide provider Clicker. I believe that operators should do everything in their power to promote VOD content, but it still surprises me to see Comcast support another company’s aggregation role. I […]

  2. […] VOD Economics: Are We There Yet? – on collapsing release windows and other signs that the economics for VOD are […]

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