Wednesday, July 2, 2008

Internet TV revenue could surge on VOD offerings

The battle for the viewer will likely depend on the access to and breadth of VOD content. As we become a society that requires immediacy and what we want, when we want it, companies that best handle the speed and variety of on demand, will get our business.

"VOD will account for about 13% of IPTV revenue in 2012, up from 3% last year, as telecommunications companies try to use their on-demand offerings to compete against the more established multichannel system operators, according to research firm Gartner." And the fight for content will grow as HD content becomes more commonplace and preferred. Telcos have built their plants to handle these huge streams of information; older cable systems, not yet rebuilt, may face an uphill battle as consumers, turned off by the latency and limited choice, seek alternative sources for content. And in fact Direct TV is now beginning to offer a VOD model to compete in this space, although it requires a broadband connection in addition to the satellite.

And this growth in VOD content will enable new revenue streams to grow as well. Pre roll advertising in front of free content, overlap ad messages, increased transactional business, e-commerce opportunities, etc. This surge in VOD offerings will continue to propel this model forward. "Internet-protocol TV service providers such as AT&T and Verizon could see revenue from video-on-demand jump more than tenfold in the next four years. This will come from fiber-optic TV services taking market share from cable and satellite companies, while more people watch VOD and pay-per-view titles."

VOD is growing in usage and appeal with consumers. It is where the battle is being fought among cable, telco, and satellite. As interactivity becomes more commonplace, it is the companies that best serves up and prices this content competitively that will maintain dominance.

Will Tivo Become the Link Between the Internet and TV

Successfully navigating all the online choices available and easily bringing that content to the TV screen are the challenges facing Tivo and its ability to differentiate and prosper. While the Tivo brand name is what Kleenex is to tissues, Tivo has yet to convince enough customers that it is better than a DVR. having both devices, I clearly prefer Tivo, but if you haven't driven a Mercedes, you can be satisfied with your VW.

Tom Rogers, CEO of Tivo says he has a plan to position his company "a hub for streaming video from all sources to the television set." And now that they are partnering with Comcast, this added value may be the tool that cable can use to remain the interface of choice for the consumer to access the internet on TV. In the meantime, competition will be fierce to be an alternative choice to be that navigation and interface choice. Companies like Netflix are trying to do it in the premium movie niche. Apple TV has built a box, but not a strong following.

Tivo must continue to innovate, improving the menu structure and search functions. At the moment, it is ahead of others, but competition is catching up. I believe that Tivo has a superior product, and perhaps with Comcast as a partner, it can achieve true product dominance and brand preference.