Who will win the battle for online VOD?

With its VideoStore, Google is entering the video-on-demand business. Google will soon start offering, in the U.S., episodes of popular series, such as CSI, for $1.99 per episode. For $3.95 it will ofer NBA shows and for $0.99 it will offer TV shows. Customers will be able to pay via their credit card.

While being an early entrant, Google's decision for launching online video-on-demand (VOD), must have been accelerated by Apple's success with the videos it offers through the iTunes store. However, Google is taking a slightly different approach. As Apple offers videos for $1.99, the Google services will act as a marketplace and lets the content providers decide in what capacity and for how much they want to sell their content.

Two prerequisites for a successful VOD business, as cable operators for example have learnt, are proven and user-friendly technology, but also a strong relationship with the content owners. Content owners - especially the Hollywood studios, the major broadcast networks, TV producers and the large music labels - tend to have a strong bargaining power in the content value chain.

There are three reasons to believe that Google can surpass Apple's video success:

• Its marketplace is more attractive to content owners
• Google has a far wider reach: Google is globally the third most visited English language site, while Apple is number 24, according to Alexa; this will attract more visitors to the VideoStore and it will also appeal to content owners
• Google has compelling video search engine

 
True, Google's product range does not comprise the excellently selling iPod video, but one may assume consumers won't make a quick shift in their behavior in terms of watching videos: the TV set or even a PC monitor are much more suitable for watching video than handhelds ever will be, at least in the foreseeable future.

The next question is: how will Google's (and Apple's) move affect the traditional distributors of video? For sure, the videotheque business is doomed, but how will operators (cable, satellite, DSL etc.) be affected? As long as consumer prefer watching video over their TV (and consumers love their TVs, as demonstrated by the hours they continue spending watching TV and they intend to do so, as the sales of flat-screen TVs shows) and there are no user-friendly solutions for beaming video from their PCs to their TVs , the role of these operators won't change too much.

Operators are in a race to continuously increase the speeds of their Internet access products, making it easier for customers to download videos. At the same time the price of broadband keeps dropping.

It seems to me that the speed at which Google and the like are growing the value they add to customers in terms of what they can get online, is by no means being matched by the operators. Will there in the future be a different role for operators other than offering a commodity called Internet access?