Video-on-demand has become a rapidly growing market in the pay-TV industry. IMS Research estimates that at the end of 2010, 13.2% of the world’s digital pay-TV subscribers were requesting VOD content via their set-top box. The number of pay-TV households using VOD services is forecast to triple over the next five years, from 53.9 million at the end of 2010 to 157.3 million at the end of 2015.

In a recently published study, “On-demand Services Business Models: Video, Games & Over-the-Top – 2011 edition,” IMS Research examines the types of services and content driving on-demand service revenues generated by pay-TV subscribers. In 2010, operators generated $4.3 billion in on-demand revenues, with traditional closed-network VOD accounting for 99.5%.

Anna Hunt, principal analyst and report author, states, “There is much interest from pay-TV operators in new revenue streams, so games on-demand and OTT integration into set-tops are getting quite a bit of attention. Nevertheless, traditional VOD services offering TV shows and movies will continue to be the main drivers for growth in on-demand revenues.” IMS Research forecasts that in 2016, closed-network VOD’s share will decrease to 94% of total on-demand revenues generated by pay-TV operators globally.

Games on-demand are forecast by IMS Research to generate $569 million in world revenues in 2016. Some telcos are currently opting to roll out the Xbox 360 as a secondary IP set-top box within a subscriber’s home, versus rolling out their own games on-demand offerings.

“Games on-demand via the set-top box is still a very nascent market,” adds Hunt. “This doesn’t mean that opportunity will not exist in the future, as the set-top box is becoming a more powerful and intelligent device under the TV set. Larger cable operators and telcos are definitely exploring options, such as launching more advanced games via their own IP networks.”