Video-on-demand, that wonderful feature that -- particularly in concert with the digital video recorder -- permits us to control our television viewing, rather than the other way around, has been a long time coming. Its arrival bodes well for a number of companies in several areas of the television and content space.

For those Fools who have not become involved in the world of video-on-demand, or VOD, the feature is, at face value, something like your old pay-per-view. However, there are substantial differences between the two, and they begin with the word pay. For years, cable executives attempted to determine the appropriate economic model for VOD. Early approaches, from five or so years ago, generally had the operators charging for most video-on-demand offerings. Those first offerings usually consisted of movies, and the cable multi-systems operators (MSOs) typically charged from $0.99 to $7.95 for a film, depending upon its type and vintage.

The VOD capability
But there are substantial differences between pay-per-view and VOD. The first is the ability of the MSO to begin showing a VOD film (or other video content form) to the subscriber immediately after the order is placed through a simple click of a remote control; there's no waiting for the show to begin on the hour or half hour. When watching the video-on-demand program, the viewer is able to pause, stop, fast forward, or reverse the showing, much as the old VCR would allow. In addition, depending on the specific policy of the MSO, the viewer is able to check out the content for at least a 24-hour period, and sometimes longer, thereby permitting multiple viewings of that content without additional effort or cost.

VOD technology also permits MSOs to offer hundreds -- and ultimately thousands -- of film titles, along with a vast array of made-for-television programming. Indeed, the later is frequently referred to as subscription video-on-demand, and the consensus among the cable operators is that this form of VOD will eventually eclipse film offerings in attractiveness to viewers.

As is the case with most viewing innovations, the full emergence of video-on-demand has occurred slower than generally was anticipated. A primary stumbling block early on was the paucity of deals between the content providers and the cable operators. More recently, however, there has emerged a proliferation of such deals, including a contract signed last month between Comcast (NASDAQ:CMCSA) and Disney (NYSE:DIS), which will provide Comcast with Disney films and ABC television programming. Earlier this month, Time Warner's (NYSE:TWX) Warner Bros. unit inked a contract with BT Group for the provision of Warner content on an on-demand basis.

Much of the programming now available from the cable operators on video-on-demand is free to viewers, and even the charges for films typically top out at $3.95. This economic model relates less to beneficence on the part of the operators than to the discovery by the major MSOs that the VOD habit does wonders for cable subscribers' loyalty to the operator. As Comcast's Co-CFO John Alchin noted at the recent Credit Suisse Media and Telcom Week Conference, his company has found that digital video subscribers tend to churn half as frequently as their analog counterparts, and those digital subscribers who have availed themselves of the VOD opportunity in turn churn half as much as their digitized brethren.

The beneficiaries
I believe that there are several companies that will be benefited by the continuing emergence of VOD, although some may be hindered. We can take a look at just a few of the companies on both sides of the ledger:

Let's begin with Comcast, easily the major domo of U.S. cable MSOs, with more than 24 million subscribers. About half its video subscribers take digital, a necessity for receiving video-on-demand, and an indication that the company has substantial room for growth in this area. Comcast's new triple play of video, data, and telephone products is helping to add digital video subscribers at a rate of more than half a million a quarter, and the company's share price has improved about 65% just this year.

Time Warner, the second-largest of the cable contingent, stands to benefit from VOD through both its soon-to-be-spun-off Time Warner Cable entity, and its Warner Bros. film and television unit. For Fools interested in doing their due diligence on the entire company, its other units generally are doing quite well, and therefore should not be a drag on the share price, which is up 35% since its July nadir.

Disney is another company that can benefit in multiple ways from the continued emergence and strengthening of VOD, since content is the sine qua non for the functionality. Disney sports a tremendous film library, and its ABC and ESPN television subsidiaries stand to gain from the new Comcast video-on-demand agreement and from similar contracts with other cable providers. Disney's shares are up nearly 40% this year.

I believe that the most pervasive and solid of the companies producing VOD hardware- and software-enabling technology is SeaChangeInternational, a Massachusetts-based company whose customers include Comcast, Time Warner, and Cablevision. SeaChange has performed admirably in the face of the lumpy quarterly results that are an inescapable part of a business that records large orders with a finite customer base. Other VOD technology producers include Concurrent Computer and C-COR.

When considering investments in the technology portion of video-on-demand, it's important for Fools to know that VOD enablement is not a one-time phenomenon for the technology companies. The cable operators -- and ultimately telcos Verizon (NYSE:VZ) and AT&T (NYSE:T) -- will need progressively more video streams as their subscriber and content levels grow, thereby leading to additional orders for the technology producers.

There are other companies that VOD's proliferation likely would not help, and I would include satellite video providers DirecTV (NYSE:DTV) and EchoStar (NASDAQ:DISH) in this group. Both companies have been very successful at signing subscribers, but their technological inabilities to offer a robust VOD product could slow their growth over time. In addition, as viewers become more comfortable with VOD's economics and ease of use, their willingness to drive to a brick-and-mortal movie retailer like Blockbuster for film rentals could diminish.

While video-on-demand has matured appreciably over the past couple of years, additional features almost certainly will be added to it over time, which will render it even more attractive to subscribers. When these other long-developed functionalities -- many of which have been figuratively waiting in the wings -- are added to the video landscape, our televisions will begin to be the faithful servants that they perhaps should have been all along.

Time Warner and Disney are both Motley Fool Stock Advisor recommendations. AT&T is a former recommendation of that newsletter. To see what other great companies have been selected, start up a free 30-day trial today.

Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your comments or questions. Fool rules are here.