SNL Kagan predicts that average on-demand revenue per user will exceed $5 a month by 2010 and $6.56 a month, or about $79 annually, within 10 years.
Multi-channel service providers will generate more than $6 billion from video on-demand, pay-per-view, and near-video-on-demand within five years, according to a study released last week.
SNL Kagan reported that total revenue in the market, which includes cable, satellite, and telecommunications companies' video services, will rise due to several factors.
SNL Kagan predicts that the combined installed base of digital cable and telecommunications companies' video services will push the number of U.S. set top boxes to more than 110 million by 2011. Adult and event pay-per-view will help drive growth as well, according to SNL Kagan's study, "Video-On-Demand: A Strategic and Economic Analysis."
SNL Kagan predicts that on-demand services will become a significant revenue source, that average revenue per user will exceed $5 a month by 2010 and $6.56 a month, or about $79 annually, within 10 years.
Video-on-demand content is generally (95%) free, but sponsorship interest is growing, SNL Kagan said. Costs in that market will likely change so they are based on cost-per-thousand-viewers.
Operators must expand the depth and scope of their offerings and expand network capacity in order to promote growth in the on-demand market, according to the study.
"We're starting to see factors align that can enable operators to translate the rise in on-demand traffic into more significant sales," Ian Olgeirson, senior analyst for SNL Kagan, said in a statement.
According to a study from Insight Research last year, ad supported content has already reached more than 50% of households. That study predicted that more than 88 million homes would have broadband by 2011.
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