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Karen Brown
Time Warner Cable's announcement of the first large-scale video on demand (VOD) tests got an added validity boost courtesy of a report released last week by a leading industry research firm.
Although plagued in the past by technical and marketing obstacles, VOD nevertheless will survive to become a $3.1 billion industry by 2005, according to the latest report by Forrester Research Inc.
The cable industry research firm concluded the cable industry's wave of fiber-optic upgrades allowing for two-way digital services will make VOD feasible even as hardware costs drop. In particular, the study found cost for servers and related technology for VOD has dropped 400% compared to early VOD trials in the mid-1990s.
At the same time, it compares well with near video on demand services, (NVOD) which allow viewer choice of movies and events but only at prescribed times. With its ability to give viewers the choice of when to view an offering, VOD will see a 300% to 400% increase in buy rates. The study predicted a 200% increase in revenue compared to NVOD services after six months.
A cable network of 200,000 homes passed will require a little more than $3.5 million to add VOD headend equipment. After studio paybacks and operation costs, an average $1.7 million yearly profit will recoup the initial investment within two years, according to the study.
Given the growth in the digital cable market, by 2003 VOD services will be able to reach some 5 million digital cable subscribers, according to the study.
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