Ad-supported VOD is pay-TV's 'missed opportunity'
A new study contends that ad-supported video on demand "is a significant missed opportunity" for pay-TV operators that should be generating significantly higher ad revenue and viewing, as well as providing a hedge against over-the-top competition from competitors like Netflix (Nasdaq: NFLX).
The report, Making Ad-Supported VOD Work, from research firm TMG, estimates that in the fourth quarter, U.S. subscribers watched 80 percent more streaming video hours than were viewed in the same period on all U.S. pay-TV VOD.
"Operators have failed to take advantage of VOD to build subscriber satisfaction, generate ad revenues and head off competition from over-the-top (OTT) providers like Netflix," said Bill Niemeyer, TDG senior analyst and author of the report.
Part of the issue, he said, is due to "awkward" programming guides that make video discovery difficult, resulting in limited use by subscribers; Niemeyer said total VOD use represented only 1 percent of all U.S. TV viewing.
More attention to ad-supported VOD, he said, could increase VOD viewing and ad revenue by a factor of three or more by deploying dynamic ad insertion, better measurement technologies and improved program guides.
"Ad-supported VOD is a significant missed opportunity for pay-TV operators," said Niemeyer. "They are investing significant resources in TV Everywhere but have ignored the fact they have a potentially viable ad and revenue-generating on-demand platform already in place in over 50 million U.S. homes in the form of VOD."
TDG's report posits that if operators don't take action, they risk falling even farther behind online and OTT video services.
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