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Cable Show ’08: VOD Just Scratching the Surface

New Orleans -- Comcast said it is now providing 500 on-demand programming choices in HD, including movies and TV shows from Starz and Showtime.

The announcement shows that the nation’s largest cable operator is following through on the “Project Infinity” initiative to dramatically expand its on-demand offerings, which it unveiled at January’s 2008 International Consumer Electronics Show.

Comcast plans to have 1,000 HD choices available by year-end, which should keep it competitive with the growing lineup of linear HD channels offered by DirecTV, chief operating officer Stephen Burke said.

But according to Burke and other top cable executives speaking here Monday morning at The Cable Show ’08, cable operators are still in the very early stages of exploiting the on-demand platform to generate new revenues and fight subscriber churn to satellite and telco competitors.

Using video-on-demand to deliver either pay-per-view movies or free content for a short period of time is “a very limited way of looking at the platform,” Burke said, speaking during a panel discussion moderated by cable analyst Matt Stump of One Touch Intelligence. Burke suggested that subscription VOD, targeted advertising and electronic sell-through applications could dramatically increase VOD’s contribution to cable’s bottom line.

“There are dozens of ways to use the platform that haven’t been tapped yet,” Burke said, adding that Comcast’s overarching goal is to make basically every piece of linear content it provides available on the VOD platform by storing it on massive server farms. Comcast is also exploring the “Start Over” and “Look Back” applications pioneered by Time Warner Cable, which allow cable subscribers to apply digital-video-recorder-like functionality to primetime content without having to plan ahead.

Besides providing more content, cable operators want to use the on-demand platform to deliver targeted ads to subscribers -- a technique called “dynamic ad insertion” and one they have been testing for years.

Taking dynamic insertion from test to commercial reality will probably have to wait for the successful rollout of “Project Canoe,” the cable industry’s behind-the-scenes effort to create a new advertising platform by which advertisers can buy targeted ads on a national basis, both for VOD and traditional linear networks.

Canoe should give a big boost to Comcast’s on-demand revenues, Burke said, adding that Comcast On-Demand would be rated as one of the top four shows in Comcast’s markets when compared with traditional linear programming.

“It’s very important to figure out how to monetize VOD, both for the operators and the programmers,” he added.

Landel Hobbs, COO for Time Warner Cable and one of the top cable executives driving Canoe, said standardizing targeted-advertising technology for VOD is essential.

“It’s all about dynamic ad insertion,” he added. “But it’s a more powerful thing when the sector can do it together and when we can all do it in a similar fashion and make it an easy buying experience across our footprint.”

David Zaslav, president and CEO of programmer Discovery Communications, agreed that on-demand advertising should be attractive to media buyers simply by the interactive nature of the platform. He compared the potential of Canoe to a Web surfer going to Google to do a search on hybrid cars, then being delivered a targeted ad pointing them to a manufacturer of such vehicles.

“When people choose to go somewhere, it’s that much more valuable to advertisers,” Zaslav added.

Digital set-tops don’t have to replicate all of the functionality of a computer, said Jeff Gaspin, president and COO of NBC Universal Television Group, but should at “least provide the best television experience possible.” He noted that as NBCU tries to make more content available on-demand, there are still thorny rights issues that need to be worked out, “and we still need to educate the industry.”

Tom Rutledge, COO for Cablevision Systems, was also excited about new applications for VOD such as targeted ads and electronic sell-through, but he said the cable industry shouldn’t forget the fundamental value of VOD -- that satellite competitors can’t do it.

“It’s important to remember why VOD is important to cable operators,” he added. “It’s a technology that allows you to do the transactional business models we’ve had, but what it really does is make cable television a much better product than our competitors.”

For more on The Cable Show ’08, click here.