Technology | Media | Telecommunications

Friday, January 15, 2010

Video Subscription versus Pay-per-View Model

Pay-TV Video on Demand (VoD) that's delivered directly to the television is generating consumer interest, but very little revenue for service providers. Free content currently accounts for more than 95 percent of the video being watched.

A new pay-TV market study by Futuresource Consulting predicts that some consumers will pay extra for movies on demand. The question that remains is what's the consumer-preferred method -- payment by monthly subscription, or pay-per-view?

Futuresource forecasts that by 2013, transactional (pay-per-view) revenues from movies on demand will reach $2.4 billion in the USA and 430 million Euros in the leading five Western European countries.

"The rise of on-demand video content that can be accessed through a laptop, PC or mobile phone shows no signs of stopping," says Carl Hibbert, Business Consultant, Futuresource, "and with so much competition out there, the consumer is in the driving seat, demanding entertainment be delivered on their terms, whenever, wherever and however they please."

The pay-TV industry is looking to VoD to supplement its linear scheduled TV offering. As well as improving their consumer proposition, reducing customer churn and recalibrating their brand positioning. Operators are attempting to use VoD to drive up the average revenue per user (ARPU), rather than improve their actual profit.

Paid-for VoD is a small part of the market, but it is expanding, and that's despite the glut of readily-available free and catch-up VoD. Growth opportunities are coming from the continued conversion of analogue to digital cable, the expansion of IPTV, and the introduction of hybrid services by satellite operators.

As movie release windows shorten and VoD releases come on stream day-and-date with DVD and Blu-ray, Futuresource believes we're going to see more traction. That said, a number of studios are holding back, believing this may cannibalize their packaged media revenues.

Apparently, improved electronic program guides (EPG) will also help to boost VoD buy rates, making content search and purchase easier, and in some cases allowing for more personalized services.

In this context, the definition of "personalization" seems subjective.

Futuresource says that the next user experience enhancement is "lifestyle-orientated" TV homepages, which will help to filter and focus all the live and on-demand content available. Thereby enabling the consumer to pinpoint and purchase relevant content as soon as it becomes available.

In contrast, I believe that a truly personalized "recommendation-oriented" playlist -- similar to the Netflix member Queue concept -- will become the most preferred method to consume video. Furthermore, the flat-fee monthly subscription model will gain more adopters than the legacy pay-per-view model.