European vid on demand making its move

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PARIS -- With a spate of new platforms coming online, video-on-demand finally started to gain traction in the past 12 months, and the coming year should see it develop on a more significant scale in the European entertainment market.

According to Paris-based audiovisual consultancy NPA Conseil, there are now around 150 VOD platforms in 26 European countries (the EU member states plus Switzerland). Major territories like Germany, France and the U.K. all have 20-plus platforms, while some of the smaller territories only have a single indigenous operator.

"Video-on-demand is a bit like the Loch Ness monster. We've talked about it for a long time but it's never showed itself. Well now it's here," said French director Jean-Jacques Beineix at a recent industry forum.

The latest newcomer is Universcine.com, a VOD movie site that claims to offer the widest catalog of local movies in France, and which will launch commercially at the end of this month.

What's unique about Universcine is that it brings together some 35 independent French producers -- including internationally successful outfits like Fidelite Productions, Diaphana and Why Not Production -- without the involvement of a major distribution company.

The site aims to offer around 300 movies, many of them exclusive, at a cost of around $6 per viewing, the idea being that a larger chunk of this will flow back to the producers if no distribution company is taking a cut.

In a bid to keep track of the plethora of new sites, NPA is finalizing a study of VOD platforms commissioned by the European Audiovisual Observatory and the French government, due to be published in the coming weeks.

"We found that VOD is developing fastest mainly on ADSL platforms," said Valerie Champetier, associate director at NPA. As a result, telecoms operators and ISPs are displacing content aggregators as the new central players in the current wave of development.

The rental model -- paying for a single screening of a chosen film -- is still the mainstay of the business. "But SVOD (subscription allowing access to a catalog) is what's developing fastest," Champetier said. The study also found that TV series are emerging as the most popular content, over movies.

The spread of digital delivery systems means audiences increasingly expect to source their viewing anywhere, any time, and many see VOD as one logical corollary of this expectation.

"VOD is the single biggest change to cinema since the invention of sound -- it's bigger than color, bigger than widescreen. It'll bring a shift in the way in which cinema is going to be consumed," John Woodward, CEO of the U.K. Film Council, said.

The challenge for the film industry is how to avoid a situation like that in the music industry where demand plummeted due to the slow reaction to online availability and the inevitable piracy problems that brings.

"The view (on VOD) in the U.K. is really positive," Woodward says. "We believe that in time, VOD will be a perfect substitute for DVD and pay-per-view."

Woodward reckons that VOD should broaden access to film titles and offer consumers a wider range than DVD and cassette stores have been able to. "Online rental stores like Lovefilm show customers renting a broader range of films than when people go to the video store. When you have the ability to deliver a wide range to customers, they exercise that choice."

But VOD is also a threat to existing models. "We can all begin to see the strains on the exhibition sector, DVD and broadcast," Woodward said.

With broadband penetration among the highest in world at about 60%, the VOD market in the Nordic countries is maturing rapidly, now with some 10 players. "We have seen volumes increasing several hundred%," said Henrik Jarl, marketing manager of Stockholm-based VOD provider SF Anytime, who reported more than 150,000 VOD open Internet transactions in 2006. But VOD over ADSL platforms has seen even faster rates of growth. "The market in Scandinavia has really discovered IPTV via broadband," said Jarl. "IPTV is where see really big growth in 2007 and also into 2008." This is partly because Sweden's broadcasting network will switch over to all-digital in 2008, and Jarl says people are beginning to make consumer choices on how they want their digital TV delivered.

Jarl says he believes the subscription model is the way forward. "That will definitely build the VOD market," he says. "The (U.S.) studios have not been keen on the subscription model. They're not keen on mixing their movies (on the same platform), but from the consumers point of view, people don't care if a movie is from Fox or Warner Bros."

NPA has only produced VOD revenue forecasts for the French market, where it estimates the rental market in 2006 to be worth in the region of €17 million ($22.5m). It forecasts that this will triple in 2007 and reach some $450 million in five years.

"It's the moment of takeoff, notably due to the widespread take-up of triple-play offers (bundling TV, phone and Internet)" said NPA's managing director Philippe Bailly. Some 11 million French homes now have broadband, and of those, around 1.5 million receive television via ADSL.

Marie-Christine Levet, CEO of Club Internet, the French ISP owned by Deutsche Telekom, described 2006 as the year VOD "entered the living room." She said ease of use, whereby customers can access a movie from one click on a remote control, is a key driver to VOD's up-take. "We're still right at the start, but people are starting to get the taste for it," Levet said.
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