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Putting VOD into Perspective with DVD Share

Some suggest that video-on-demand (VOD) will eclipse the packaged media DVD in the foreseeable future, but Kagan Research forecasts that U.S. consumer spend on VOD by 2016 will still be smaller by a wide margin.

Kagan forecasts that U.S consumer spending on VOD and pay-per-view (PPV) will be one-quarter the consumer spend on U.S. home video in a decade. For years, VOD has been held out as the 'Next Great Thing' and it is steadily fulfilling that promise, but not as fast as some might expect.

Kagan attributes the measured pace to competition from digital video recorders, film distributors enforcing stringent digital rights management of their titles, cable TV's emphasis on free or flat-rate subscription VOD (SVOD), and technical constraints related to limited bandwidth.

Regardless, U.S. on-demand programming is forecast to grow at a hefty 12 percent compound annual growth rate (CAGR) over the next decade, reaching $8.7 billion by 2016. The CAGR for U.S. home video software at consumer spend will be under 3 percent over the same period, yet on a total dollar basis it still remains much larger.

The on-demand figures encompass VOD and PPV programs delivered by cable TV, satellite TV and Internet protocol TV being rolled out by telcos. But the figures exclude broadband video that typically does not deliver sharp full-screen pictures, and also excludes handheld devices.

Through the first six months of 2006, Kagan estimates cable TV is the biggest U.S. platform of true-VOD capable homes with nearly 26.2 million, or 86 percent of the 30.4 million digital cable households.

Kagan says that True-VOD gives users singular control to choose a start time, as well as stop and rewind. Near-VOD is less sophisticated, presenting the same title with multiple start times, but without a stop/rewind capability.

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