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Basic Nets Play VOD Card, Move Forward with Trials

Though most of the focus on video-on-demand and subscription VOD content has centered around theatrical films and premium-network content, basic-cable programmers are also forging ahead with VOD trials and deals.

As VOD and SVOD activity grows, basic networks are combing their libraries for appealing fare. ESPN owns about 7,000 hours of programming and is negotiating with sports leagues about material that could fit a regional ESPN Classic-type VOD offering. Imagine loading up servers in New York and Florida with highlights from the Yankees, Mets, Knicks, Jets, Giants, Rangers and Devils games from the past 40 years, for example.

A&E Television Networks has more than 900 Biography
episodes, and offers 10 to 15 installments through a trial with Intertainer for about $1 per show. And Comedy Central, Court TV, Turner Network Television, Cartoon Network, Discovery Networks U.S. and Disney Channel are licensing content to various VOD suppliers, including Intertainer Inc., Diva Systems Corp. and In Demand.

"We've always believed VOD was more than just movies," said Mike Davis, director of programming and acquisitions at Diva, which offers content from ESPN, TNT, CNN, Cartoon, Discovery and Disney to the service's 200,000 available subscribers.

Diva also is talking to Court TV, Comedy and A&E. With respect to the latter's Biography, "everybody thinks that's pretty compelling," said Davis.

"The big problem is clearing rights," he added. Documentaries contain video and audio clips from multiple sources; there are also issues surrounding differences in U.S. and international rightsholders. Copyright lawyers must tackle both problems.

"There hasn't been a lot of thinking about VOD until recently," Davis said, so it wasn't accounted for in previous contracts.

Diva, whose technology is available mainly on Insight Communications Co. and Charter Communications Inc. systems, charges 99 cents for most TV shows, Davis said. He said the episodic- subscribers can see content from PBS, Cartoon and Disney. Individual titles are also available à la carte, but Davis said half of the revenue derived from kids' shows comes from the $9.95 package.

"People love the model," he said. Diva sells 6,000 to 8,000 monthly children's SVOD packages across its 200,000-home subscriber base, Davis estimated.

He believes VOD and SVOD are close to reaching critical mass. The company expects its technology to be in 1 million homes by year's end.

"We're getting to the place where the numbers are there," Davis said. "The networks are waking up."

A&E senior vice president of affiliate sales David Zagin said the results of his company's test with Intertainer "are on par where we thought it would be."

"When you extrapolate it out, it's a very good business," said Zagin, who cautioned that the user base is still small.

At the moment, A&E isn't refreshing Biography
all that much, Zagin said.

"Ideally we would refresh it on a monthly basis" and rotate titles after three to four months, he said. That may not happen until A&E has more VOD deals and a wider base through which to spread its costs.

A&E also plans to test some original movies and content from The History Channel. One thought is to place high-profile movies on VOD — perhaps 30 days after their network premiere — to take advantage of the initial marketing without hurting viewership, Zagin said.

Going forward, networks will need to strike a balance between airing content on VOD servers and the network, where ratings drive ad sales, according to Zagin. SVOD packages marketed as the "best of" a basic-cable network could prove counterproductive, except in the cases of movies and sports, he cautioned.

"I'm not sure you're helping your asset value by doing that," he said.

ESPN has been supplying Diva with some product for years, but it's kicked its efforts up a notch in 2001. The network's most popular offerings on Diva include the X Games, sports highlight shows, boxing, and classic college basketball and football games. The VOD component has been "mildly successful."

Diva's children's VOD package has been more successful, he said.

The lineup ranges from more than a dozen SportsCentury
profiles — including those of Babe Ruth, Willie Mays, Muhammad Ali, Joe Louis, Jerry Rice, Dan Marino and Lawrence Taylor — to the 1973 Ali-George Foreman "Thrilla in Manila" and the 1998 Tennessee-Nebraska Orange Bowl game. There are also fishing and exercise shows plus the 2000 and 2001 Dallas Cowboys Cheerleaders Challenge.

ESPN executive vice president of affiliate sales and marketing at ESPN Sean Bratches said the programmer could fill plenty of server real estate.

"We think there is a market for VOD," he said. "We can populate those servers."

ESPN has about 7,000 hours of programming in its library, including 20 years of National Association for Stock Car Racing (NASCAR) coverage. The channel is adding about 10 hours a week of fresh content to Diva servers, Bratches said.

Bratches also sees basic-cable programmers as eager to explore the SVOD model.

"SVOD is much more palatable to distribution platforms and content providers because it replicates the cable model," he said.

SVOD eliminates most transaction expenses and some marketing outlays, simplifies back-end billing and reduces the need for in-depth analysis of the revenue yield for any particular piece of content, Bratches added.

But the big four professional sports leagues could hold up ESPN's winning run.

Say there's a disappointed New York Mets fan in September 2001 who'd prefer to watch a VOD extended highlight reel of the 2000 Mets, 1986 Mets or 1969 Mets stored on a local server. Would ESPN be the middleman, or would Major League Baseball offer the content itself? That remains to be seen.

But the idea is something Bratches and ESPN are pursuing.

"People are starting to [see] that maybe PPV (pay-per-view) isn't the right model, and they are focusing on the subscription model," he said. "Once the infrastructure is there, it's all about maximizing space."

And what if every basic network wanted server space? Davis said that's no problem.

"We won't run out of space because storage costs are coming down quicker than content is getting to servers," he said.