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Report: VOD pay-TV service failing to reach its potential

Video-on-demand service from pay-TV operators is falling short of its potential in terms of viewer numbers and ad revenue, according to a new report from The Diffusion Group (TDG).

The report, “Making Ad-Supported VOD Work,” identifies inadequate ad support and awkward program guides as the main culprits. Both factors contribute to limiting the availability and viewing of ad-supported video-on-demand content.

Due to the inattentiveness of pay-TV operators to ad-supported VOD, total VOD use represents only 1 percent of all U.S. TV viewing. 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.

Comparing Netflix to pay-TV VOD in the United States during the fourth quarter of last year, Niemeyer estimates U.S. Netflix subscribers watched 80 percent more streaming video hours than viewed pay-TV VOD.

"Ad-supported VOD is a significant missed opportunity for pay-TV operators," says Niemeyer. "They are investing significant resources in TV Everywhere (TVE) 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," he said.

The report notes failing to act will place pay-TV operators at risk of falling even farther behind online and OTT video services.