VOD taking hold? (Technology).

The spate of deals announced by some L.A.-area video-on-demand companies could portend increased interest in the movie distribution model. It could also just be feeding a pipe dream.

CinemaNow Inc. of Marina del Rey, Intertainer Inc. of Culver City and TVN Entertainment Corp. of Burbank recently announced deals expanding their reach, even as the viability of the market is questioned.

"The news is great," said Sean Badding, a senior analyst at media research firm The Carmel Group. "But there's nothing going on."

Badding contends that VOD works, but can grow only in metropolitan markets with digital cable infrastructure. Once the service starts drifting outside the city limits, demand drops off considerably, he said.

By the end of 2002, 20.8 million of the nation's 65.3 million cable subscribers will have digital service, according to Badding's projections. "It's a third of the market, but that doesn't mean a third are taking video-on-demand," he said.

Dom Stasi, chief technology officer at TVN, said a number of factors will prove Badding wrong. Resolution of signal security issues, the plummeting cost of digital storage and other advances make VOD more affordable and easier to deliver, he said.

Staff reporter Christopher Keough can be reached at [phone] ext. 235, or at [e-mail].