August 19, 2003 2:39 PM PDT

Net video to become a staple for cable?

Video on demand is a growing business for cable companies, according to a new study that predicts that 15 million cable subscribers worldwide will be paying for the feature by 2007.

Video on demand (VOD) is a service offered by cable companies that lets subscribers order movies any time of day and control the video like a recording. Unlike pay-per-view services, subscribers can pause, rewind or fast-forward scenes from the movies and TV shows they order.

Although VOD is still in its infancy, cable companies could see incremental benefits as they begin to offer these services. Cable companies have been upgrading their systems to digital, which allows them to offer more channels and more features such as VOD. The companies have been pushing their subscribers to upgrade so they can sell new features that can be sold only on a digital network.

"It's important because it's a service that provides additional revenues to cable operators," said Mike Paxton, an analyst at In-Stat/MDR, which authored the study. "It's competing with people running down to blockbuster and renting a movie."

About 40 percent of all cable subscribers have VOD access. There are currently 5 million cable VOD subscribers worldwide, according to the study.

The study showed that the biggest hurdle cable VOD providers face is consumers' comfort with the current staple of video playback devices, namely VCRs and DVD players. Cable companies also face competition from digital video recorder offerings, such as TiVo, that allow consumers to program which shows they record and to control live television.

 

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