OTT gains at the expense of cable VOD in US

MUMBAI: Over-the-top (OTT) video service providers like Netflix are filling a need gap in the US as pay-TV operators have failed to capitalise on the potential of video-on-demand (VoD) services.

As a result of pay-TV operators‘ lack of attention to ad-supported VOD, total VOD use is small, representing only 1 per cent of all U.S. TV viewing. The failure to accomplish this is a reflection of VOD‘s inadequate advertising support and awkward programme guides that limit availability and viewing of ad-supported VOD content, according to US research firm The Diffusion Group (TDG)..

Titled ‘Making Ad-Supported VOD Work’, the report states that the VOD services provided by pay-TV operators should be generating significantly higher viewing and advertising revenue with a little more push from the operators.

"Operators have failed to take advantage of VOD to build subscriber satisfaction, generate ad revenues, and head off competition from over-the-top (OTT) providers like Netflix", according to Bill Niemeyer, TDG senior analyst and author of the new report.

Niemeyer estimates in Q4 2011, Netflix US subscribers watched 80 per cent more streaming video hours than were viewed in the same period on all US pay-TV VOD.

"Ad-supported VOD is a significant missed opportunity for pay-TV operators," noted Niemeyer."They are investing significant resources in TV Everywhere (TVE) but have ignored the fact they have a potentially viable ad- and revenue-generating on-demand platform already in place in over 50 million US homes in the form of VOD."

TDG‘s new report describes how operators could increase VOD viewing and ad revenue by a factor of three or more by deploying dynamic ad insertion, better measurement technologies, and improved programme guides. If operators do not act, they risk falling even farther behind online and OTT video services.

Making ad-supported VOD work includes the results of conversations with key executives in the TV network and ad agency community. It identifies eight specific areas where operator action will improve the VOD platform. The report offers in depth quantitative estimates of how VOD use and advertising revenues would grow if the operators act to enhance VOD for ad-supported content.

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