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Over the Top Video Will Be the Most Disruptive

Amid news of technology heavyweights such as Apple Computer and Amazon.com lining up their resources to address the Video-on-Demand (VOD) market, iSuppli Corp. is predicting the global VOD market will grow to nearly $13 billion by the year 2010.

VOD growth will be driven by various delivery systems, including Internet Protocol Television (IPTV), broadband/Internet and networks run by cable and satellite operators. While 2006 will be a banner year for the VOD market, the real explosive growth will begin in 2008 when these delivery systems begin to mature. By 2010, the global VOD market will generate more than $12.6 billion in revenue, up from $1.7 billion in 2006, iSuppli predicts.

Global IPTV equipment deployment, a growing breadth of movie content, the ability to “download and burn” content, the increasing availability of consumer electronics equipment with IP connections and a rising mobile phone television market will contribute to the rapid acceptance of VOD. Such growth has interested a multitude of companies across many industries.

“This sets the stage for an epic battle among cable, satellite, IPTV and new broadband video operators,” said Mark Kirstein, vice president of multimedia and content services at iSuppli. “As users expect more interactivity and a greater personalization in their services, VOD is among the key technologies that will address the changing behavior of television audiences.”

Broadband/Internet VOD, the type of distribution system that Apple announced, represents the most interesting -- and yet most challenging -- category for VOD. In such schemes, broadband delivery of VODis offered "over the top" of service providers’ existing broadband networks. The technology relies on consumer data broadband connections and is delivered on a best-effort basis.

Because this type of VOD is less restrictive than IPTV, enabling content to reach more consumers with minimal geographic restrictions, broadband/Internet promises to be potentially the most disruptive market for VOD. Beyond challenging the incumbent television carriers, Broadband/Internet VOD could present a threat to other industries.

“The impact of VOD could stretch well beyond remaking the television landscape, with its potential to replace a significant portion of DVD rental and retail sales and the possibility it could decimate the movie theaters’ monopoly on first-run films,” Kirstein said. “It’s almost a certainty that 15 years from now, the business of direct DVD sales or physical DVD rentals will dwindle to be a fraction of today’s market -- at best.”

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