The consumer appeal of watching movies and other content through video-on-demand (VOD) services is already proven, and the cable industry is now moving quickly to use VOD technology for new applications such as time-shifting of linear channels and interactive advertising.
That was the takeaway from a panel Sunday at the NCTA show in Atlanta, where executives from major cable operators and programmers gathered to sing the praises of VOD.
Comcast delivered 1.5 billion on-demand streams in 2005 and expects that number to grow this year, says Comcast Senior VP of Marketing Marvin Davis. With VOD, Comcast is able to offer some 7,000 programming choices per month.
“Once they experience it, it’s transformational,” says Davis of the customers’ reaction.
VOD is both a way to drive digital growth and a significant product differentiator from cable’s satellite competitors, adds Peter Stern, executive VP of product management for Time Warner Cable. Stern says that 50% of Time Warner’s digital subscribers use VOD and the average customer uses it 30 times a month.
“It’s reached the inflection point,” says Stern.
Time Warner is now using VOD technology to enhance the linear programming experience with Start Over, which lets viewers record a show that is already in progress and return to the beginning to see what they’ve missed. The product has been in service on 61 channels in Time Warner’s Columbia, S.C. market since Nov. 1, and the customer response has been very positive: 70% of customers have used the product, and they use it an average of seven times a month.
Time Warner is also moving to launch a service called Quick Clips that will take content originally created for the Web and repurpose it as a VOD stream. For example, says Stern, a viewer could tune to The Weather Channel and immediately call up a local online forecast, which would be transcoded to video and sent to the digital set-top as a VOD session. Stern says that Time Warner already has a deal for Quick Clips content with CNBC and is negotiating with CNN and The Weather Channel, which he thinks is an ideal application.
“That’s what people want, to be able to turn to The Weather Channel and get their local weather,” says Stern.
Gregg Hill, president of Rainbow Network Sales, notes that IFC is now offering the independent films it distributes on VOD the same day they are offered in theaters. He says such “day-and-date” releases are a great way for cable to serve movie buffs living in areas that only get mainstream movies in theaters. Hill says the idea reminds him of his early days at Bravo, which launched with the notion of delivering niche content to underserved yet desirable viewers.
“It’s now how many, it’s who,” he says.
Operators and programmers agree that advertising has huge potential with VOD, though Davis cautions that the “technology is a little ahead of the business model, and the business model is still a bit ahead of the customer.”
Stern says that Time Warner is already testing the concept of “telescoping,” using a link in a linear program to trigger long-form advertising delivered through VOD. Early telescoping trials in upstate New York have already yielded 100 million impressions, he says.
But advertisers still need to see better reporting and measurement of viewership before they will commit big dollars to VOD advertising, says Ryan O’Hara, president of TV Guide Channel and TV Guide SPOT for Gemstar-TV Guide. O’Hara says that advertisers are comfortable with making decisions based on the overnight Nielsen ratings for linear programming, and they also like the infinite accountability of Internet ads; he adds that VOD measurement still falls short by comparison.
“The history of television-ad sales and the Internet have really raised the bar on VOD,” he says.
But he thinks advertisers will gradually embrace on-demand, as some 5% of cumulative viewing is already on VOD: “Advertisers are smart; they’ll go where they eyeballs are.” Mike Pohl, president of VOD vendor C-COR Global Strategies, notes that the same C-COR product already used to insert advertising in linear television could be used for VOD: “We could deliver thousands of ads.”
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