Primetime and scheduled TV are
losing their impact as consumers create their own entertainment
lineups. Digital video recorders (DVRs) and video-on-demand (VOD) allow viewers to watch content on their own schedule
and avoid traditional TV advertising.
At the same time, the slowing economy drives advertisers to demand the greatest return
on their advertising investments. With interactive digital platforms
allowing more measurability, the business case for traditional TV
advertising is becoming increasingly weak.
VOD would seem well-positioned to capture a rising share of ad spending, but the way consumers use it may limit its potential as an ad medium.
Most cable TV operators offer free VOD content in combination with
pay-per-view options, but time-shifting with DVRs is proving more
popular.
According to Comcast—the leading cable operator in the US with 14.7
million subscribers—the most popular free VOD content is karaoke, music
videos and programs for children.
VOD's ad potential is somewhat limited by use. An August 2007 study by IBM indicated that only 48% of US adult Internet users had used VOD.
eMarketer estimates that VOD is available in one-third of TV households today, and will reach over 60% of households by 2012.
Still, MAGNA Global data shows that VOD households have grown rapidly, from 12.9 million in 2003 to 42.5 million in 2008.
Content is the big driver of VOD usage. ChoiceStream data from
December 2007 shows there would be greater viewership of VOD if there
were "more content of interest." Notably, however, 57% of respondents
said they would not watch more VOD even if the content were better.
Clearly price, awareness and usability are also factors in VOD usage.
Increasing the VOD audience (and ad revenue potential) may
depend in part on advertisers and marketers: Better content, supported
by ads, combined with VOD awareness and education campaigns, could be
part of the solution.
Learn about the changing ways in which consumers consume video content. Read
eMarketer's TV Trends: Consumers Demand Control report.