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A true video-on-demand system provides the user with the freedom to select video content at any time and to perform VCR-like user interactions. This requires a dedicated video stream for each customer request. Incoming customer requests result in a significant load on the server and network resources. This is due to the high bandwidth and long duration of video content. Network cost can be very expensive because multiple streams are required for different customers even when they are watching the same video. Techniques such as batching and patching have been proposed to reduce the bandwidth requirements of a video-on-demand system. These techniques are not satisfactory when the users perform at large number of interaction on the system. This paper describes a technique to reduce the bandwidth requirements of a video-on-demand system that is not dependent on the user interactions. The proposed technique therefore reduces the network costs significantly and allows interactive video-on-demand functionality.