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NPD: Traditional Services Losing VOD Eyeballs

Port Washington, N.Y. – A newly released study of video-on-demand
(VOD) users by The NPD Group has found the window of opportunity closing
rapidly on traditional pay-TV services to reclaim lost VOD revenue from
Internet-based interlopers.

NPD’s VideoWatch VOD tracking service tallied 4 million fewer
pay-TV VOD users who paid additional fees to watch movies in August 2011
compared with August 2010.

Meanwhile, viewing among iVOD users of TV shows, news and sports on
traditional pay-TV services dropped 12 percent in the 12 months ending August
2011, according to the report.

The iVOD channel includes movie offerings from iTunes, Amazon,
Vudu and others.

Some 15 percent of U.S. consumers ages 13 and older used pay-TV
VOD movie services from a cable, satellite or fiber-optic provider in the 12
months ending August 2011, which translates to 40 million users.

By contrast the iVOD channel has already reached 7 million users.
One out of every six (16 percent) paid VOD movie-rental transactions were
attributed to iVOD in 2011.

The current VOD market for paid movie rentals is ruled by pay-TV
services, with revenues that reached $1.3 billion last year.

But the emerging iVOD movie market reached $204 million and is
growing quickly, which may already be leading to consumers reducing their use
of pay-TV VOD a-la-carte movie services.

“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, industry analysis
senior VP for NPD. “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.”

“The challenge for pay-TV operators is that there is significant
overlap between iVOD and pay-TV VOD movie usage,” Crupnick said. 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

“iVOD users reduced their time spent watching TV shows, news and
sports via pay-TV companies by 12 percent between August 2010 and August 2011,
so 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,” according
to Crupnick.

NPD said users perceive watching iVOD movies to be a better
value, than watching movies on pay-TV VOD. Users also have a more favorable
perception of iVOD when it comes to available movie-title selections.

“iVOD distributors are effectively using CRM, free trials and
other promotions to gain trial usage of their services by new customers,”
Crupnick said. “With this new competition eating away at revenues, pay-TV
operators need to be equally aggressive with promotions in order to instill a
habit of movie buying among their subscribers.”

For more information, or to acquire the report, contact NPD at