As IP becomes the predominant choice for video delivery, storing the ever increasing number of videos for delivery will become a challenge. In this paper we focus on how to take advantage of user viewing patterns to place content in provider networks to reduce their storage and network utilization. We first characterize user viewing behavior using data collected from a nationally deployed Video-on-Demand service. We provide proof that users watch only a small portion of videos (not just for short clips, but even with full-length movies). We use this information and a highly flexible Mixed Integer Programming (MIP) formulation to solve the placement problem, in contrast to traditional popularity-based placement and caching strategy. We perform detailed simulations using real traces of user viewing sessions (including stream control operations such as Pause, Skip, etc.). Our results show that the use of a segmentbased placement yields substantial savings both in storage as well as network bandwidth. For example, compared to a simple caching scheme using full videos, our MIP-based placement using segments can achieve up to 71% reduction in peak link bandwidth usage.