SNL Kagan's new study, "Video-On-Demand: A Strategic and Economic Analysis," estimates that total VOD, PPV and NVOD revenue generated by U.S. multichannel service providers will top $6 billion within five years. This total includes cable, satellite and telco video offerings, with major contributions coming from the adult and event PPV sectors.
SNL Kagan expects on-demand services to evolve from value-added elements designed for increased customer satisfaction to significant revenue generators. On-demand ARPU is expected to top $5 per month in 2010 and $6.56 per month — or nearly $79 annually — in the 10-year outlook.
"We're starting to see factors align that can enable operators to translate the rise in on-demand traffic into more significant sales," said Ian Olgeirson, senior analyst for SNL Kagan.
VOD advertising is also a promising revenue generator. Executives at VOD-based channels have seen great demand from sponsorship revenue, an increasingly important financial factor since 95% of all VOD content is free. SNL Kagan expects the market to evolve gradually into a cost per thousand viewers model.
Growth in the on-demand segment will rely heavily on the ability of operators to expand the breadth and depth of the offerings by increasing the reach and capacity of their networks. Digital video is not only a competitive necessity for cable operators, but it also provides the foundation for future revenue growth. When combined with telco video services, SNL Kagan projects that the combined installed base of digital cable and telco video set-top boxes will top 110 million by 2011.
"Video-On-Demand: A Strategic and Economic Analysis" is available exclusively as part of the SNL Kagan Information Service. For more information on this report and other media & communications data sets within the SNL Kagan Information Service, call 866-296-3743 or e-mail SNLKaganSales @ snl.com.
About SNL Kagan
SNL Kagan is the ultimate resource for complete financial intelligence on the broad and dynamic media & communications sector, including the broadcasting, cable, entertainment, motion picture, telecom, wireless, satellite, publishing and new media industries. The SNL Kagan suite of products integrates breaking news, comprehensive data and expert analysis into an electronic database available online and updated around the clock. SNL Kagan combines the 38-year heritage of Kagan Research with parent company SNL Financial's 20 years of experience in providing essential guidance to Wall Street and to America's top corporations. For more information, visit www.snlkagan.com.