I want my VOD

Three billion. That's the number of video on demand downloads Comcast has serviced in the US since 2004. And, staggering as that number may be, the pace is accelerating. In fact, last September alone Comcast set what must have been an international record by filling 180 million on-demand requests. It's official: viewers have glommed on to the VOD platform, and they want more.

That's got to be welcome news for cable operators, especially those in the US, where rumors place the investment in system upgrades at nearly $100 billion in the last decade, mostly in preparation for new services such as VOD. On-demand in the living room is the holy grail for cable operators, who are fighting a rearguard action against broadband, satellite providers, IPTV, PPV, DVRs, and a myriad of other platforms that provide users with content.

At least this is one fight where cablecos and viewers are on the same side. Nearly every survey demonstrates a clear preference on the part of consumers to have content served up in their living rooms, on the box they have grown to love, at a time of their choosing. An Olswang Convergence Consumer Study conducted in November 2005 that sampled 1,500 13- to 55-year-old consumers in the UK found "a weighty 57% want to watch varying digital programs, of their choice, including TV and film, whenever they like."

That desire is predicted to trigger an explosion of on-demand-enabled homes. An Informa Telecoms and Media study conducted in late 2005 estimates that by 2010, there will be 350 million VOD- or NVOD- (near-VOD) enabled homes around the world - 103 million of those in the us. It's estimated that 86% of that growth will happen in North America and Europe.

Comcast's numbers alone suggest the latent potential of the platform. The company's digital footprint is 10 million customers (all of whom have VOD access), out of a total base of about 23.3 million homes currently serviced. Consider the possibilities if those potential digital customers made the switch. Right now, an average of about 70% of Comcast's digital customers use the on-demand service in any 90-day rotating basis. Impressive as 180 million on-demand views a month is, the potential is more than double.

What is motivating viewers to switch? Though a 2005 Datamonitor VOD study simplifies the equation as "more content = more usage," it goes further to add: "While the quantity of content is important, the quality and range of content is crucial. In addition, free content needs to be provided to encourage initial use, with pay services only likely to succeed once consumers are more comfortable with the concept of accessing on-demand services."

That's a lesson Comcast learned early. The company currently offers 4,000 programs, 95% of which are available at no additional charge to customers after initial monthly fees. As Datamonitor observed, Comcast found purchases grew by 60% after it deployed free VOD.

However, that's not to say the economics are simple. For viewers, the Olswang survey found that while "pricing is going to be a key factor to the success of different services, there seems to be no single pricing model that is likely to satisfy all customers." Some viewers prefer a pay-per-view option, some pay-to-keep, others simply a base subscription.