Video on Demand: It’s Actually Not Television’s Enemy

To some, video on demand may still feel like a new, revolutionary technology that’s going to change the future of TV and movies. But a new study shows something surprising: VOD viewership may be slowing down. When it comes to content, what’s old is new again.

In its annual State of VOD report, released on Tuesday, the metrics company Rentrak—which provides real-time data on box office, home video, digital video, and VOD to the entertainment industry—reveals that in 2013 viewers spent an average of 8.7 hours with VOD content per month, up only a modest 12 minutes from a year earlier. Transactional revenue for the year was $1.5 billion, down about 6 percent from in 2012. Content categories that were once drivers of VOD growth, such as kids programming, movies, and music, were all down.

But there was one interesting growth area: broadcast TV content. The report shows that the total time spent viewing on-demand broadcast prime-time content grew to a billion transactions, up 23 percent from 2012. “Remember, fast-forwarding is disabled on broadcast prime-time shows on demand,” says Rentrak Chief Executive Officer Bill Livek. “So, to discover something on the VOD platform, someone who actually wants to watch a show has to sit through the commercials—and this shows that they are willing to make that trade-off for the convenience.”

The report found that two-thirds of prime-time program viewing on demand occurred after the third day of a program’s original airing. Why is this important? For television networks, the commercials that appear during a show when it’s broadcast are the same ones that air for the first three days of VOD availability. After those three days the ad strategy often changes, as it’s understood that the content is no longer as “hot.” Now, because a huge number of viewers are seeing these shows after the third day on VOD, “there’s a multibillion-dollar opportunity for TV networks to charge advertisers according to that,” Livek says.

What about the recent phenomenon of binge-watching entire seasons of TV shows in a few sittings? “We haven’t really seen it,” Livek says. “For most broadcast networks, most viewers see one to three episodes a week. For cable networks, about two-thirds of folks view one to three episodes.” There are a few outliers, and Livek points to the example of last summer’s hit CBS show Under the Dome, which picked up viewership over the course of a month going back to the original episode. “People are using VOD to discover a show that someone told them about, and then to catch up so they can watch the rest of it when it airs,” he says.

In other words, it doesn’t obliterate prime-time television. VOD is, if anything, enhancing and supporting it. “I’ve seen so much about the demise of the traditional ecosystem and this notion that nobody’s watching regular TV anymore,” Livek says. “But these numbers show that an increasing number of people are moving back from VOD to regular TV.”

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