Video On Demand : Future of Television

In marketing terms, Video On Demand services promise the end of the TV schedule as we know it, allowing consumers o-one one access to a huge inventory of content, any time, day or night, completely independent of what's on old-school "appointment" TV.

What's on Thursday at 9? Soon no one may care.

In infrastructure terms, VOD are server-side offerings which allow consumers to “pull” content directly from the storage of service providers. Programming can be free, a la carte, or subscription pay models. Cable providers have undertaken major capital expenditures to offer hundreds of programs from their On Demand services, available any time, to any enabled viewer.

VOD offers two major advantages over older Pay Per View models:
1. variety of content, since the breadth of VOD content is independent of existing network schedule; and
2. the ability to start and pause a program at any time the viewer chooses.

Though DVR trick play features are an obvious selling point, the first ability is the real story of VOD. The ability of MSOs to offer rich varieties of programming themselves, rather than remaining conduits for the networks, is a huge advantage over competitors with less robust offerings.

This leads to heart of the issue, another sea change in the TV business via VOD. Imagine a latter-day David Chase whose pilot is rejected by a latter-day HBO. This auteur will have the option of bypassing the current networks entirely, cutting a VOD deal directly with a cable provider and sharing the VOD revenues without a network split. Current-day mavericks like Howard Stern have already begun to do this, and more will follow.

Downside: The primary downside of the model is cost of infrastructure. The dedicated server architecture required to support VOD is much more demanding than the one-to-all model that TV has been based on until now, and rising cable bills are partially a result of the price of this build out. And with new content dependent on system overhauls, consumers are just now beginning to see value for the cost.

The second caveat for VOD is scalability. When a service is really the new new thing, how much capacity is enough? Until VOD takes off for consumers, buildout is based on estimates of maximum load – essentially a back-of envelope on how many consumers the operator thinks might pull at the same time. When more consumers come, will the systems be ready to bear the burden, or will service delays drive consumers away?

If so, providers will adapt. VOD is the future of television. Or at least one-third of it.