Louise Duffy ©RapidTVNews | 05-09-2011

Premium services will further drive the growth of video on demand (VOD) equipment, according to analyst firm ABI Research.

Pay TV providers are preparing to offer viewers premium VOD offerings – new movie releases expected to cost $25-$30 and showing about two months after a cinema premiere and two months before release to DVD, premium channels (such as HBO), and video services (such as Netflix).

Premium VOD is one of a handful of new services, along with advanced advertising and catch-up TV, which will drive 20% growth in the worldwide market for VOD equipment, from $493 million in 2010 to $591 million in 2016.

While expensive, the total cost of premium VOD is designed to be less than that of cinema tickets and a babysitter. Some customers may prefer the flexibility to stay at home while watching more recent content. For the time, however, this offering is expected to add some marginal revenue for content owners and operators without significantly altering the content revenue equations.

Pay TV providers have integrated extra security into premium VOD in order to protect content from illegal activity.

“Premium VOD requires close co-operation of VOD server and content protection vendors,” said Sam Rosen, senior analyst, digital home.

“In the case of DirecTV’s premium VOD launch, Home Premiere, SeaChange worked to integrate watermarking technology by Civolution to help persuade Hollywood to release premium content to video on demand (VOD) platforms.”

Operators are also implementing advanced advertising solutions to help justify upgrades to their VOD equipment. Comcast recently announced it is using dynamic pre-roll and post-roll ads for VOD content in selected markets, with a full rollout expected by 2012.

"To date, most operators have been providing their free VOD libraries only as a way to reduce subscriber churn, with the focus on attracting viewers,” said Rosen.

“Now, VOD system manufacturers are turning their attention to advanced advertising as a way for operators to sell ads in VOD streams. For instance, Concurrent's advanced media data logistics platform enables all types of advanced advertising within a VOD platform.”

ABI Research’s “Video-on-Demand, Video Server, Ad Server, Content Delivery Network Hardware” study covers worldwide markets for VOD hardware, video server hardware, ad servers, and content delivery network hardware used exclusively within service provider or video delivery networks