The recent court ruling in favor of Cablevision allows cable providers to offer on-demand programming to non-DVR subscribers, by remotely storing subscriber selections at head-in locations. Many DVR subscribers already have access to on-demand servers from Comcast and others. This week, my satellite TV provider began offering on-demand to their HD/DVR subscribers. The HD/DVR set-top boxes have the required Internet connection - in fact I am downloading TV shows over my "Comcast" cable modem to my DirecTV sat box. The major of American TV viewers will use these approaches - why buy another box to put under the TV?
The next tier of VOD/MOD users will be Netflix customers. Netflix has the brand, the content (20% of their DVD inventory and growing), and a multi-price point hardware solutions for viewing VOD/MOD on your television set - where it belongs. You can choose a Web-to-TV component with general Internet Access, the $99 Roku Netflix-streaming-only box or the LG Blu-Ray DVD/Netflix streaming solution (price to be announced but expect $400).
Next is AppleTV with a loyal set of iTunes enthusiasts. Vudu - a proprietary solution with "snappy" search made possible through extensive caching and peer to peer networks with other Vudu boxes - will need serious black magic to stay viable against this competition.
New cable/phone solutions will fall Somewhere in-between. Turner Cable has a web-to-TV solution forthcoming. Verizon & AT&T will fiber variants. And Sezmi with 4G will each lock up segments of the market.
Internet-only solutions viewed primarily on computer displays will persist although many of the players will end up as acquisition fodder (e.g. BitTorrent and Jaman) or disappear entirely (e.g. MovieBeam, CinemaNow, etc.) or merge with general purpose content providers (e.g. Veoh, Joost).