More and more players are entering the VOD sector as television viewing moves away from the traditional linear format to an on-demand environment. New entrants, in particular smaller companies, may face a difficult choice when it comes to sourcing their content, especially the most important material - Hollywood movies.

If you are a would-be VOD operator, the Hollywood studios - with their infamous minimum revenue guarantees - can seem a daunting prospect. So it is entirely understandable that you might look to an "aggregator" as a way to get hold of the key content but without having to deal with the studios yourself.

The aggregator's sales pitch is straightforward - we've done the difficult stuff of negotiating with the studios so we can sell you an attractive package of VOD content in return for a small share of revenues. We'll take some or all of the pain out of the minimum revenue guarantees and we´ll offer you the benefits of economy of scale, of our experience in running VOD services and of our own ready-made brand.

It sounds easy and attractive. But is it really? The aggregator may well appear to make life easier for you, and it is true that a lot of sweat has been taken out of the equation, along with the prospect of negotiating directly with the studios. But what else might have been taken away from you?

For a start, the aggregator takes away your flexibility and some part of your independence - you buy its VOD service and sell it on. Even if you buy a "white label" product and retail it under your own brand, you are still restricted by the package of content your aggregator partner has assembled and by its pricing terms.

If you retail the aggregator's "ready-made" brand, you are not creating or enhancing a brand of your own. At some point, when the VOD business is established, you might want to drop the aggregator and create your own service - but you would then have to build a service and a brand from scratch.

Another downside is that you are dependent on the aggregator's approach to tactical marketing, which might express a very different tone and brand values from that of your own marketing for other products.

As new formats and services emerge, you run the risk of being left behind the competition because you lack a direct relationship with the studios. There could be problems, for instance, if you want to offer subscription VOD (SVOD) when your aggregator has rights only for transactional VOD, or if you want to extend your service from the TV set to the PC and the aggregator does not have the appropriate deals.

It is also quite probable that an aggregator will provide a standard, non-exclusive product when perhaps what you really need is a specific mix of content that will help you to differentiate yourself from the competition.

Last, and far from least, is the not insignificant matter of that small cut of revenues that the aggregator takes in return for providing its services. Once you have taken out the cut that goes to the studios - typically 60 per cent of the VOD retail price - the aggregator's cut may not seem quite so small after all.

While some people in the industry talk up the idea of the aggregator as the solution to all VOD problems, the reality is that there are very few aggregators and most of these have additional lines of business.

The main players include SF Anytime in the Nordic market, operating both in the IPTV and online video spaces and Glowria in France, which aggregates content for telco Neuf Cegetel and runs an online DVD rental service.

On Demand Group (ODG) can also be considered an aggregator, although it is involved in a much wider way in the VOD sphere and has been active in the UK, Germany and Greece. It offers technical management and generally runs the whole service for an operator. Until recently, its main business was as a partner, alongside studios Disney and Sony, in the Filmflex VOD service carried by UK cable operator Virgin Media. ODG continues to provide technical support to Filmflex, where - rather unusually - two film studio shareholders also aggregate content from other studios.

Aggregators are limited in number and there may be little or even no choice in some markets. On top of that, the market for aggregators is an increasingly tough one. Glowria, for instance, has pulled out of Germany and is focusing on its home French market, while Liberty Global's Chellomedia has scaled back to focus on adult content and no longer aggregates mainstream movies.

An alternative approach to using an aggregator is for the VOD operator itself to sign deals directly with the studios. Not only the bigger cable operators have done this, but also newer IPTV operators. To implement this successfully, an operator will need to acquire or build its own in-house team with expertise in negotiations with studios and other rights holders.

Alternatively, the process of acquiring content can be carried out, or supported, by external consultants, who are experienced in this field and who have long-standing relationships with relevant studio executives.

An operator might well opt for a mixed solution, using an aggregator to provide one type of content and doing direct deals with studios for other material. For instance, it could go directly to the studios for mainstream movies while buying in adult movies from an aggregator service such as Chellomedia.

Each of the three approaches - using an aggregator, going directly to the studios on your own or doing so with the support of external consultants - has its benefits and different operators will evaluate the pros and cons and come to different conclusions. It all comes down to exactly what kind of service you want to run and how much control you want over it. Deciding which way to approach setting up a video-on-demand service is one of the biggest decisions that a cable or IPTV operator will have to take and choosing the right approach will be crucial to the creation of a successful and profitable service.