Hello, Please Try Our VOD Free – For Now


Here’s a sure way to sell anything: Enlist the cable operator and the telemarketer, two of Joe Consumer’s most despised modern personalities, to get the job done. Executives from premium network Starz Encore Group are unbowed by that prospect. They have, in fact, begun using telemarketers to help promote their subscription video-on-demand product, a timeworn tactic to help convince consumers that they should try a great new service, says Greg DePrez, the company’s VP-subscription VOD.

After a cable system launches a test or a deployment of Starz in a given area, the premium programmer enlists a telemarketer to call the targeted subscribers to tell them about the on-demand service and how they can access it for free – at least to start.

DePrez uses telemarketers – hangups, phone slammers and Jerry Seinfeld (“Why don’t I take your home phone number and call you back later?”) be damned – because he says many people don’t believe direct-mail marketing that tells them they can pick the movies they want to watch, when they want to watch them and rewind, fast-forward and pause them on command. “You have a large credibility hurdle,” he says. “We’ve done surveys that say they don’t believe the marketing. It’s beyond what television has done before.”

Telemarketing helps on another key front as well, according to DePrez. If the operator’s VOD system isn’t working in a given home, the consumer can tell Starz, which in turn will alert the MSO. The targeted phoning is just one of the several marketing campaigns Starz launches once a system rolls out SVOD. For example, Starz followed its trial launch with Comcast Corp. in Willow Grove and Lower Merion, Penn., with direct mail. In these mailings, Starz tries to convey the convenience of selecting from its 150 hours of premium programming for free during the trial, DePrez says. After the trial, the group works with operators like Comcast to price the service, somewhere between $4 and $6 a month.

The goal is to move beyond “free on-demand” programming, considered by many operators a threat to the success of video-on-demand. Many programmers are similarly wary, pointing to the revenue morgue that was the Internet, wherein content providers thought that after offering a free sample of their material, they could then convince those samplers to pay a fee – subscription or pay-per-view. (One programmer defying that skepticism is Discovery, which will offer ten hours of free content as an appetizer for its 500 titles, about a $10 monthly subscription on-demand offering.)

In case a letter or phone call fails to reach a customer, Starz is also trying a different kind of VOD rollout – a Jeep equipped with a massive remote control and video-on-demand system. The VOD-mobile is touring malls and appearing at events, including the National Cable & Telecommunications Association’s annual convention next week. The group wants consumers to see the VOD magic with their own eyes. The Jeep also will help train customer service representatives for cable operators, DePrez adds.

At this point investment in such methods is needed because each trial or deployment is small and targeted by neighborhood. Other than to say he writes “big checks” every week for marketing, DePrez would not disclose the amount of his budget. Starz’s SVOD subscribers total less than 1% of its 12.9 million subscriber base as of the end of December, according to the company’s latest numbers.

But once VOD takes off, Starz plans to use cross-channel spots, barker channels and broadcast advertising to sing SVOD’s praises. “Getting a nondigital, non-Starz customer to understand this when they’ve never done this before is tough,” he says. “The next ramp up for us and this business opportunity is when we can go to mass-marketing opportunities.”

Mark Greenberg, Showtime Network’s EVP-corporate strategy oversees its SVOD offering and sees the benefits of educating consumers through sampling but discourages operators from serving it for free for very long.

“On-demand is one of the most important value propositions we’ve had to offer consumers in some time, but people have been overreacting to the early data,” says Greenberg. “People are saying, ‘Hey, let’s give it away!’ But we’re losing an incredible opportunity to create a value proposition. People never thought you could pay for TV, and Gerry Levin proved them all wrong. VOD is no different.”

Greenberg points to Showtime’s focus groups and feedback from its early tests with Adelphia. “Our analysis of actual transactional data shows, in terms of the focus groups we’ve done, that when you give something away for free it’s less meaningful,” says Greenberg. “Consumers stumble on it, and people fear if they use it there will be a cost associated with that in their minds. But we believe from every piece of research we’ve done that consumers are willing to pay.”

Those early Showtime on Demand tests indicate that consumers are willing to pay between $10 and $15 monthly for access to on-demand programming. Greenberg’s confidence in customers’ willingness to pay is tied to his confidence in the quality of his on-demand product. “No question, VOD is valuable,” he says. “It’s compelling, it makes people stop and take a breath.”

Now’s the time to promote the value equals cost model, Greenberg adds, because early glitches have been worked out. “Technologically, there has been a high blockage and stoppage in early trials, but we’ve all learned from that. And consumers have been reasonably forgiving because they love having access to a library of rich content, and the convenience of the availability,” he says. “Now [that] we’re over that learning curve, I say let’s try to do this right instead of rushing it and burning the marketplace.”

Greenberg supports the subscription model for the simple reason that too much choice could mean viewers will make none at all. “A so-called free on-demand platform leaves an enormous amount of money on the table,” he notes. “With a la carte, our fear is you’re creating more consumer choices, meaning more decisions at that moment of truth. So we support the notion of charging for VOD as a category, of making it as simple a proposition as possible for the consumer.”

SVOD also makes life easier for the people on the front lines of those VOD-buying decisions: the customer service representatives who answer subscribers’ queries about the new VOD service popping up on their televisions. “If you charge on a per-unit basis, it’s harder for the CSRs to explain and sell,” Greenberg says.

HBO is testing price points for its subscription product in Time Warner Cable, Adelphia and Cablevision markets. With Time Warner, for instance, HBO is charging $3.95 per month in the Columbia, S.C., market, $9.95 in Cincinnati and a median of $6.95 in Austin, Texas. In Adelphia’s Cleveland system, the service is free, for the moment. And on Cablevision in Long Island, New York, the product is offered for $4.95.

HBO on Demand has had a 50% penetration among HBO digital subs in Columbia, according to Glenn Britt, chairman and CEO of Time Warner Cable. As he said in a speech earlier this month: “You might say our promotion efforts were a little too successful – but if that was the bad news, the good news is subscription video-on-demand is a hit with consumers.”

Will Lee contributed to this report.

COPYRIGHT 2002 Copyright by Media Central Inc., A PRIMEDIA Company. All rights reserved.

COPYRIGHT 2003 Gale Group

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