Video on demand (VoD) is still in relative infancy in terms of user take up and money-making, with revenues of $2.7 billion this year, but that is set to change with the market generating revenues of $12.7 billion worldwide in 2011, according to analyst Ovum.
As a result, telcos who don't realise VoD's huge potential and catapult it up their content business agenda are likely to be in for a tough fight for survival.
"VoD is not a revenue generator at the moment but a 'must have' vision of the future in terms of both cash flow and telcos' content business survival," said Aleksandra Bosnjak, Ovum's content and media analyst.
Ovum predicts that many of those that are wise to the money that VoD will generate in the future will start to move themselves into content distribution by launching their own on-demand propositions.
"From a content provider's perspective, telcos and ISPs will be the new contributors to content distribution and film finance, especially over the long term as the service improves and reaches a more significant scale and enhances its on-demand functionalities," added Bosnjak, who plans to present the full findings of her research tomorrow at the 60th Cannes Film Festival.
She added: "We argue that over the next five years, 50 per cent telcos' costs will come from content acquisition and marketing-related activities. In their quest for an innovative content strategy, some telcos will experiment with various forms of content finance, such as financial backing via minimum guarantees, or go even deeper into the actual co-productions or co-ventures."
