Premium nets: face VOD music: convenience issues and market tests have to be addressed before VOD becomes truly viable – Premium & Pay TV

Tim Clark

Let’s face it. Numerous consumer issues need to be tackled before VOD can become the lean, mean revenue-generating machine it promises to be. VOD market tests also need to unfold across a much larger canvas to prevent the fledging technology from remaining an unsolved mystery to programmers, MSOs and, above all, consumers. In response, premium networks are tag-teaming with MSOs in a direct effort to answer VOD’s convenience and testing uncertainties.

One of the top reasons consumers defect from the pay TV universe is largely due to inconvenience. Movie availability, sound and picture quality are always in check, but the schedule of playtimes is not. Broadening the schedule of playtimes, a logical approach, hasn’t helped the churn-reduction predicament. Since most consumers can barely change the time on their VCRs, let alone set the timers, taping programs isn’t a realistic solution either.

Introducing a convenient interface is in order. Say you’ve stumbled across The Sixth Sense on a premium channel, and it’s already half over. In the future, wouldn’t it be great if popular movies, such as The Sixth Sense, were blessed with a start-from-the-beginning icon? Activated through the remote control, the special icon would immediately begin to play the movie from the beginning. When this becomes a reality, it will undoubtedly help consumers meld VOD into their lifestyles. By re-starting a movie in progress, the consumer has left the premium channel they just visited nanoseconds before.

“They would have actually begun what the industry calls a VOD session, which means that, in our instance, a Starz! device would be playing that movie out directly to them, and they would have VCR control over it,” says Greg DePrez, VP-subscription video-on-demand, Starz Encore Group.

The consumer was actually watching linear TV for a brief moment, but what they saw, although available at many different viewing times, wasn’t convenient for them. The option of using the special view function allowed the movie to start from the beginning. This method also allows the consumer to conveniently bypass a menu.

Why doesn’t this technology exist today?

“We are currently preaching it to all the entities that affect program delivery,” says Deprez. “We have to tell a lot of related enterprises about this so they make sure they figure out how to incorporate it into their systems.”

Not just cable operators and DBS people. Communicating with DBS/cable enablers and set-top makers is also under way, so they, too, will see this new extension on the VOD horizon.

An attractive user interface is another VOD issue plaguing the premium nets. Alas, designing an interface the consumer wants to use repeatedly is a daunting challenge. Deciding if VOD should be a hits-driven business or a delivery-driven business lies at the heart of this challenge. Since pay-per-view holds new releases and video stores carry the bulk of library rifles, melding these two worlds seems to be the best solution.

“The question is, what’s the interface we can come up with that allows the user to find those movies in a quick, easy way,” says Gene Falk, SVP-Showtime Digital Media Group. “If you can’t accomplish that, there’s no point in having them there.”

Falk ultimately believes library rifles will have a home in the VOD marketplace as long as the user has an easy way to find them. Sorting movies by title, director or genre or opting to use fancy graphics are the issues to be dealt with from a marketing point of view. By solving these finer marketing challenges, VOD will transform into a “robust business,” according to Falk. HBO also intends to aggressively market its VOD plans, which have been evolving over the past six years.

“We’re taking some of our market growth and re-investing those growth dollars back into the future of the product,” says John Billock, president of HBO’s U.S. Network Group.

Billock says there will ultimately be different HBO VOD product models through which MSOs will dole out varying amounts of server capacity.

Pricing library content in the VOD realm is another slippery determination. When a VOD programmer needs different product, they have to approach the studios. In turn, the studios will provide a list of movies not licensed to other parties, which are generally 10-15 years old. The VOD provider, in turn, will air these older films and charge a couple of dollars.

“We think offering 20-30 movies a month from our channels for just a few dollars more over the subscription offers an enormously better value,” says DePrez.

He feels consumers will not be compelled to spend $2-$3 on a 10-15-year-old movie on a transaction basis.

“We think we are going to change the dynamic of this concept of library,” he says.

Surprisingly, open cable and other standards don’t look to infringe upon the progress of the aforementioned issues.

“We’re hoping that, eventually, the kind of standard that evolves will give the programmer the opportunity to control their own content, and I am confident that will happen,” says Falk. Today, VOD is being delivered on digital tape. It’s a time-consuming process to bring a series of tapes to a server to download files. Fortunately, server companies are now rallying around a standard, which is being endorsed by some of the major MSOs and suppliers.

“It’s very helpful that some of the MSOs work this way because as we send movies to them, we can use the standard they’ve come up with,” says DePrez. “It may evolve in the future, but the good news is that there’s enough good will among MSOs and suppliers.”

Stepping up testing efforts is also high on the VOD to-do list of premium cable nets. HBO has struck agreements with Time Warner Cable, Cox Communications and other MSOs to deploy market tests. HBO says its VOD tests will be happening by fourth quarter 2000 to first quarter 2001. HBO’s targeted markets will be announced in the near future.

“I think ITV and VOD are going to be a function of how quickly the advanced digital boxes get into the consumer market,” says Falk. “We’ll see some significant testing in 2001 and some expanded testing/rollouts by 2002.”

Showtime also relies on the Web to test VOD potential in the marketplace.

“We did a boxing match on a VOD basis online, and the interesting thing was that the broadband version gave the broadband users five camera angles to choose from,” says Falk.

Lack of proper bandwidth prohibits a similar scenario from being delivered via cable or satellite today.

“When it does become a reality, we’ll absolutely look at porting that over,” says Falk.

He says Showtime uses the Web stricfly to experiment with VOD.

DBS is also encouraging MSOs to exploit their head-end-based VOD capability.

“They’re embracing the technology the best way they can by integrating the PVR technology,” says DePrez. “This is a motivator, and we definitely hear it from the MSOs.”

DePrez believes DBS is unquestionably keeping cable on its toes in the VOD arena. He says that over time, technology is going to allow satellite to push a broader selection of content into consumer’s homes.

“Today, DBS is at a disadvantage, even though there really isn’t a lot of competing VOD out there in the cable market,” says DePrez.

COPYRIGHT 2000 Copyright by Media Central Inc., A PRIMEDIA Company. All rights reserved.

COPYRIGHT 2003 Gale Group

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