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The demands of demand

The purpose of marketing is to spark demand. But it is demand—video-on-demand—that has cable marketing executives anxious.

VOD and its TV-on-demand cousin, the personal video recorder (PVR), dominated last week's CTAM Summit, the annual gathering of cable-system and -network marketing managers.

Time Warner Cable Vice Chairman John Billock cautioned that missteps in the demand-video arena could further disappoint video-hungry consumers. Cable is already losing 2 million customers annually to direct-broadcast-satellite providers, which generally offer a superior channel lineup. Cable operators, he said, "have to claim our technological superiority."

The two products hold both promise and threat to both operators and networks, which have very different issues. In VOD—serving up packages of products via a high-end cable system—operators agonize over marketing and packaging movies and TV shows so that subscribers will actually demand them.

But networks are terrified that selling their programs on VOD systems will drain viewers away from the commercials. (Both networks and movie studios are also terrified over piracy.)

PVR systems like TiVo and ReplayTV present related issues. Cable operators want to integrate the video hard drives into cable set-tops. DBS, the rival to cable operators, aggressively went this route more than a year ago.

But, since piracy issues and standardization issues leave cable customers leasing equipment, rather than buying gear outright, operators can't figure out how to profitably set monthly pricing and marketing for a TiVo-like cable box and program guide.

Through all the hesitation, anxiety and uncertainty, marketing executives got the message that demand technology is coming whether it's a tight fit with their businesses or not.

Ken Potashner, CEO of ReplayTV PVR manufacturer SONICblue, said his company has been sued by 29 different media companies over commercial-skipping features and Replay's ability to send recorded TV shows and movies through an Ethernet port and onto the Internet.

The technology is inevitable, he said. "Whenever you get a disruption like you have now, with technology itself, you have opportunities on every side of the disruption. The losers are the ones that try to cement their existing business models and business approaches. The winners are the ones that take out a clean sheet of paper and redesign it."