For several years, Rentrak has published a “State of VOD: Trend Report.” One thing that clearly stands out in this year’s report is that popular TV programs are becoming the mainstay of VOD.
First, a little explanation of the jargon (as every industry has to have its own):
Subscription Video-on-Demand (SVOD) refers to on-demand content from pay cable services such as HBO, Showtime, Epix, etc.
Most operators (or in the true inside lingo, Multichannel Video Programming Distributors, or MVPDs) give pay cable channel subscribers the ability to watch their movies and programs on-demand, so a subscriber can catch True Detective on HBO On Demand, or Hunger Games on Epix On Demand.
Transactional-on-Demand (TOD) refers to movies or events paid for by a household. As an example, an MVPD will make a movie such as Frozen available on-demand several months after it has been in the theaters. The viewer then has to pay to watch the movie (usually within a window of 24 hours after ordering). TOD content is really what the MVPDs thought VOD was going to be all about—generating income from movies, events and, let us say, “adult content.”
There is also the TV Entertainment category. This category consists of the most popular TV shows, across all dayparts, which broadcast and cable networks make available on-demand, including current (and sometimes past) series or seasons.
Finally, there is all other Free-on-Demand (FOD) content, which refers to all other free programs, including some specifically made to air on-demand, such as music-on-demand, and a variety of other niche shows.
So with the lingo under our belts, let’s go back to the days of yesteryear (2010) and see what VOD looked like then:
Share of Viewing Hours in VOD by Type of Program Format in 2010
Subscription................. 35%
Other Free VOD.............32%
TV Entertainment...........20%
Transactional..................13%
In 2010, “Subscription Video-on-Demand” had the largest share of viewing hours, followed closely by “Other Free VOD.” “TV Entertainment” was a distant third, and Transactional-on-Demand trailed in fourth place.
Now, let’s shoot forward to last year to see a drastically different picture. Again, we are looking at share of VOD viewing hours:
Share of Viewing Hours in VOD by Type of Program Format in 2013
TV Entertainment...........35%
Other Free VOD..............28%
Subscription...................27%
Transactional..................10%
There is a dramatic change. The cable and broadcast network’s “TV Entertainment” category is now No. 1, with a 35% share of hours. “Other Free VOD” edges out “Subscription Video-on-Demand” by a hair, and “Transactional-on-Demand” remains in fourth place, slipping to only 10% of hours.
Share is one thing, but one also needs to consider the absolute growth in VOD. The total number of VOD hours watched was 3.6 billion in 2010, growing to 4.5 billion in 2013, an overall growth rate of 25%. But that growth rate was by no means even across the board when one considers the specific percentage growth in hours by type of VOD format.
The popular shows in “TV Entertainment” grew by over 120%. “Other Free VOD” grew by 10% while time spent viewing “TOD” and “SVOD” fell in the 3% range. However, Rentrak’s Digital Download Industry Service reports that revenue for OTT movies (purchased) has grown by 124% since 2010. So the demand to watch movies at home has not fallen; instead, the supply has grown with OTT options.
Why has viewing of “TV Entertainment” grown so much? Again, supply is a big factor. In the fall of 2013, the networks and MVPDs worked together to make available more than the traditional four most recent episodes of popular series to each household. When more programming options are available, the audience will come. Or, as Willie Sutton, the famous bank robber, said in response to the question, “Why do you rob banks?”—“Because that is where the money is.”
And advertisers are starting to go where the audience is. Rentrak estimates that there is a potential multibillion dollar business in VOD advertising, just with digitally inserted pre-roll ads. Those and other details can be found in the full “State of VOD: Trend Report 2013.”
Bruce Goerlich is chief research officer at Rentrak, the movie measurement and TV Everywhere measurement and research company.
