Once viewed as a competitive necessity—though not necessarily a money-maker—on-demand programming from television set-top boxes is starting to make bucks for cable and satellite companies.

Revenue from multichannel delivery of video on demand, pay-per-view and near video on demand will reach $6 billion in five years, according to SNL Kagan‘s "Video-On-Demand: A Strategic and Economic Analysis" report.

SNL Kagan said that on-demand average revenue per user is expected to pass $5 a month in 2010.

"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 at SNL Kagan.

SNL Kagan also said that a CPM model would evolve for on-demand sponsorship, since 95% of all VOD content is free.

Via eMarketer