Rapid TV News

Pay-TV providers’ VOD losing out to web-based players

Joseph O'Halloran ©RapidTVNews | 17-02-2012

Cord-cutting may not be having great effect on pay-TV providers as yet but the online channel, in particular over the top (OTT),  is having a marked effect on the pay video on demand (VOD) industry.

According to the VideoWatch VOD tracking service from analyst NPD, the VOD market for paid movie rentals is ruled by pay-TV providers, accruing revenues of $1.3 billion in 2011.

Yet the survey also showed that internet VOD (iVOD) users’ viewing of TV shows, news, and sports from pay-TV providers dropped 12% in the twelve months ending August 2011 with the iVOD sector for movies alone amassing reaching $204 million.

NPD adds that this shows that pay-TV VOD consumers reducing their use of pay-TV VOD a-la-carte movie services and calculates that there were no less than four million fewer pay-TV VOD users who paid additional fees to watch movies in August of 2011 compared to August 2010.

From an age demographic, 15% of US consumers ages 13 and older used pay-TV VOD movie services from a cable, satellite, or fibre-optic provider in the twelve months ending August 2011, which translates to 40 million users. By contrast the iVOD channel, which includes movie offerings from iTunes, Amazon, Vudu, and others, has already reached seven million users. Moreover, one in six paid VOD movie-rental transactions were attributed to iVOD in 2011.

“With consumers being exposed to more paid on-demand viewing options, pay-TV operators still have a window of opportunity to take advantage of their relationship with customers,” said Russ Crupnick, senior vice president, industry analysis for The NPD Group. “The home TV is by far the leading way consumers pay for movies via VOD and pay-TV companies currently control both the billing relationships and the remote controls associated with those TVs.”

According to NPD, users perceive watching iVOD movies to be a better value, than watching movies on pay-TV VOD and that such users also have a more favourable perception of iVOD, when it comes to available movie-title selections. The analyst warned that pay-TV operators now must not only defend their movie VOD revenues, but also counter an emerging threat to the basic programming served to consumers.

“The challenge for pay-TV operators is that there is significant overlap between iVOD and pay-TV VOD movie usage,” Crupnick added. “This overlap is expected to expand -- possibly cutting deeply into pay-TV VOD movie revenues -- as growth in consumers’ use of Apple’s iTunes, Vudu, and other services expands to new connected devices in the home, and as iVOD interfaces become easier to use.”