08.11 Europe/London, July 24, 2011 By Chris Dziadul

On demand TV revenues from movies and TV programmes – excluding revenues from other sources such as sports and adult, as well as SVOD packages – should reach $5.7 billion (€3.97 billion) in 2016, according to the On demand TV Forecasts report published by Digital TV Research. This compares to $3.6 billion (+58%) last year and $2.1 billion (+171%) in 2006.

Digital cable will generate, at $2.6 billion, the highest revenues in 2016, or almost double the $1.5 billion recorded in 2010. Although DTH will remain in second place with $1.7 billion, the gap between the two platforms will widen over the period. IPTV will meanwhile overtake DTT next year, with the only significant on demand DTT revenues being found in Western Europe and especially Italy.

In terms of regions, North America and Western Europe will account for two-thirds of on demand revenues by 2016, down from 80% in 2010. The greatest growth will be seen in the Asia Pacific region and in particular China, with the figure tripling over the same period to $1.2 billion. Overall, the US will remain in top place in 2016 with revenues of $1,828 million, followed by Italy with $592 million and China with $509 million. The UK will be in fourth place with $282 million, with Russia the only CEE market in the top 10, in tenth place with $131 million.

Commenting on the results, report author Simon Murray said: “Much emphasis has been placed on on-demand services making up the operators’ shortfall in declining TV subscription revenues as homes converted to bundled packages and as greater competition leads to lower fees. On-demand TV revenues will grow, but not fast enough to compensate for this decline.”

Murray continued: “Free on-demand has attracted much attention as this catch-up provision acts as a customer retention tool. There is little evidence to suggest that these free services actually encourage subscribers to pay for on-demand titles. In fact, it may be harder to convince households to pay for on-demand services if they have become accustomed to receiving free on-demand titles.

Consumers can also catch up with missed programs via the internet. Web-based catch-up services are often easier to use than TV-based ones, allowing the viewer greater flexibility and a better environment to select. TV-based services will improve as smart sets become more commonplace.

Some have advocated that the provision of a large pool of on-demand titles plus the rapid take-up of connected sets will accelerate the demise of linear channels. Although the viewers’ interaction with connected TV services still needs a lot of improvement, the most vulnerable linear channels to the adverse affects of on-demand are those that rely heaviest on reruns. Channels providing the freshest content will remain the most popular.”