Combined Annual VoD and NVoD revenue will increase fivefold to Euro 2.2 Billion by 2008, while DVR service penetration will also increase to 20% of Western European Digital TV Homes by 2008, says Yankee Group.
Video on demand (VoD) and digital video recording (DVR) are phrases that service providers are getting very used to – because that is where their business is heading, and both will “coexist as complementary options for digital TV customers,” says Jonathan Doran, Yankee Group Broadband & Media Europe senior analyst, in yesterday’s news release.
Yankee predicts that Video-on-demand (VoD) and its variants will account for an increasing proportion of digital TV revenue in Western Europe, with products like FastWeb and arrivo accounting for a growing proportion of European pay-TV revenue in the next 3 to 5 years.
Two reports, On-Demand TV, Part 1: VoD Will Grow Europe’s Pay-TV Markets, but Not Much, and On-Demand TV, Part 2: Operators Must Move Fast to Add DVR to Their Digital Proposition, mention some challenges that VoD must face. Cable operators, for example, will have to fork out for digital upgrade costs and provision of customer-premises equipment, while satellite operators won’t be able to provide true VoD services if they don’t have a return path. Furthermore, while services such as Sky+ and PILOTIME are showing strong initial appeal among early adopters, high subscription fees will deter many users.
But most importantly, Yankee says platform operators will have to recognise that VoD represents an enhancement of the digital TV value proposition rather than a core application, so that although VoD will become an intrinsic part of digital TV, it will only account for a modest share of overall service revenue.
Operator-provided DVR service faces numerous challenges, Yankee warns, like competition from standalone retail DVR and DVD-R units. However, as equipment prices continue to fall and platform operators increase their marketing push, consumer adoption of DVR service is increasing. “DVR services will be more widely and frequently used by digital TV subscribers than regular VoD offerings that are limited to the less ubiquitous cable and broadband platforms,” says Jonathan Doran.
It’s still more theoretical than practical at the moment, so many cable operators will have to play it safe and offer both VoD and DVR until a demand pattern is established.