Forty-two percent of video-on-demand viewers believe that in 10 years time, traditional TV scheduling will no longer exist, said Andy Li, director of engineering for Motorola’s On Demand Solutions, today at TelcoTV. This, in short, is Motorola’s vision.

“In the very beginning, video on demand was actually only about movies on demand,” Li said. “This model evolved into subscription on demand, which became a popular model for operators.” Now operators are focusing on the entire on-demand experience, from free VOD services to time-shifting live TV to on-demand advertising, which Li called a “new revenue generator for lots of operators.”

Operators can capitalize on on-demand ad insertion capabilities by allowing advertisers to use either static or dynamic bumper ads or by splicing ads into the VOD content. Through the combined video and ad server, operators will be able to send different ads, targeted toward particular households or toward each subscriber.

VOD will be able to support advanced services like time-shifted, on-demand advertising, Li said. With this model, operators could choose between two modes of advertising. The first would involve letting users choose their own ads, but they usually won’t want to do that, Li said. But so much information will be available about customer viewing habits, preferences and interests that directed ads can be very successful, he said.

“With on-demand, the key is to have a broadcast stream turned into a unicast stream,” Li said.

In general, the business case for deploying VOD is improving. More than 60% of digital cable subscribers now say they have used VOD, up from 50% in 2005 and only 25% in 2004. Operators are no longer reliant on traditional VOD drivers like blockbuster Hollywood movies. Simultaneous active content titles are up by 43% as the gap between VOD movie release times and DVD rentals is narrowing.

Local programming is also on the rise. Comcast recently announced a goal of developing 20,000 unique local programs.

To keep up with consumer demand, cable and telco providers are also focused on bringing their VOD content in high definition, a capability launched by CableVision in 2003. One in six households currently has an HD television set, and 25% have more than one. Comcast increased from 15 to 100 hours of HD content in 2006 and hopes to double that by the end of this year. Verizon also announced HD VOD plans back in June.