Viewers no longer satisfied with television programmers telling them what to watch will fuel the growth of video-on-demand (VOD) services. Media and communications firm SNL Kagan estimates that total video-on-demand, pay-per-view (PPV) and near-video-on-demand (NVOD) revenue generated by multichannel service providers will top $6 billion USD within five years.

According to SNL Kagan’s study, "Video-On-Demand: A Strategic and Economic Analysis," average revenue per user is expected to top $5 per month in 2010 and $6.56 per month (or nearly $79 annually), including cable, satellite and telco video offerings.

The firm also projected that by 2011, the combined install base of digital cable and telco video set-top boxes will top 110 million.

"We're starting to see factors align that can enable operators to translate the rise in on-demand traffic into more significant sales," said Ian Olgeirson, senior analyst for SNL Kagan.

Not surprisingly, the largest expected contributions to the new video services will come from adult and event pay-per-view sectors.

Given SNL Kagan’s calculation that 95 percent of all VOD content is free, advertising in VOD could be the solution in sustaining the technology for the mass market. Furthermore, SNL Kagan expects the market to evolve gradually into a cost per thousand viewers model – similar to advertising on the web.

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