In Canada, the future of the format is ad-supported VoD. Denis Seguin looks at how this could work.

There are an estimated 2 million video-on-demand households in Canada, representing a penetration rate of 43.5%. Accountants PricewaterhouseCoopers forecast a market of 4 million by 2010, at a penetration rate of approximately 55%.

'The technology and infrastructure costs are coming down and storage is more cost effective,' says David Purdy, vice-president of television services at Rogers Cable, Canada's largest cable provider.

For Purdy, the future of the format is ad-supported VoD. 'As the on-demand platform evolves, it will be dependent on advertising. Advertising has always been part of the original broadcast model. On-demand offers a programmer-friendly model to build out their ad revenue.'

The key to ad-supported on-demand - and the sticking point in Canada - is dynamic advertising insertion, whereby the VoD provider inserts new advertising to replace the original commercials delivered in the previously broadcast programme. The Canadian rules require the provider to leave the VoD offering as it was aired originally. At issue are the rights of performers who appear in those originally aired commercials.

'It's holding back innovation in the marketplace,' says Purdy.

Speaking of innovation, cable operators currently have an advantage because VoD is not available via satellite providers. But telecoms company Bell Canada plans to launch an internet VoD service as soon as April of this year.

Mobile content on the move

Analysts predict that by early in the next decade the worldwide mobile TV market will be worth somewhere between $7bn and $12bn. The big question for feature film rights owners and distributors is how much of that impressive total will be spent by mobile-device users on watching full-length movies rather than pop videos, sports clips and tailor-made '3rd screen' shorts.

In North America, the prospect of selling or renting movies to large numbers of mobile customers seems a long way off, given that the market is less technologically mature than many European or Asian territories.

A handful of deals have been announced - among them mobile operator Sprint's 2006 agreement with Walt Disney Company, Sony, Lionsgate and Universal to offer titles for rent for between $3.99 and $5.99 and Bell Canada's pact to offer a pay-per-view movie service powered by Sprint's mSpot service - but the headlines have not yet turned into big business. The market may see a boost if video retailer Blockbuster's reported talks with phone manufacturers about delivery of movies come to anything.

Outside the US, the more widespread use of 3G mobile devices in markets such as the UK and Italy suggest more immediate opportunities for film distributors. In Japan, long-form programming is already an accepted part of the mobile entertainment menu, so movies could be the next step.

Sales executives at the Hollywood studios say they have had discussions with mobile-phone operators in some regions. But, says MGM Worldwide Television co-president Gary Marenzi, 'There hasn't been a real market demonstrated yet, as far as we can see.'

Sony is one studio that has done a handful of international deals, in Italy, Japan and South Korea. In the latter market, the studio recently signed a VoD licensing deal with mobile operator SK Telecom that covers 50 movies, including the Spider-Man films, Surf's Up and Kung Fu Hustle.

Sony Pictures Television International executive vice-president Keith LeGoy suggests the growth of the movies-on-mobiles market will depend on the spread of high-tech handsets.

'It's an area that is set to grow,' he predicts, 'and as with all these types of services, the speed at which it's going to grow will be determined by the roll-out of the technology.'