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Programmers Focus on Free VOD Fare

Cable operators' calls for more free video-on-demand fare are not falling on deaf ears among multicultural programmers who, for the most part, are treading lightly with subscription and transactional VOD offerings.

“Consumers have gotten used to watching television without any incremental charge on a per-program basis,” said Doug Sylvester, chief operating officer of VOD content provider TVN Entertainment.

Similarly, TV One CEO Johnathan Rodgers, said his network simply doesn't want to burden potential viewers with added costs. “I don't want to say to you, 'Give me another 10 dollars a month to get this,' ” he said,

Still, Sylvester said there are exceptions — such as special events, movies and sports. He also cited the appeal of on-demand foreign-language fare for certain audiences.

Specifically, the immigrant audience has to be large enough to sustain an SVOD network, though not large enough to sustain an ad-supported cable or satellite network.

According to Scott Wheeler, senior vice president of network development for Comcast-owned International Networks, in some cases, “it is easier to do SVOD. The problem with a linear channel is that you have to be on both the East Coast and West Coast, which makes it hard to program a linear channel. SVOD for movies and music is a natural.”

Comcast launched an SVOD offering of Bollywood movies and music videos in mid-September. In its first six weeks, the service generated a few thousand subscribers paying at least $9.99 a month for 50 hours of programming. Mauro Panzera, Comcast senior director of multicultural marketing, said the service was averaging 30,000 orders a week, which represents “a very high usage per subscriber.”

Wheeler anticipates adding one SVOD offering in the first quarter of next year and another in the second quarter.

Bollywood movies and music have been available via on demand since 2004. “We admittedly launched with some content that wasn't the best,” said Joe Schramm, president of New York-based Schramm Sports & Entertainment, which crafted the deal along with [212]Media.

Schramm recounted how an Indian manager at Comcast told him, “Joe, your movies suck, but my mother watches every single one of them.” Since then, according to Schramm, they have upgraded the quality.

The Bollywood on-demand offering, called BODVOD, is available through TVN to some 9 million homes. The cost per movie ranges from $2.99 to $3.99. The plan is to offer operators a Bollywood SVOD package with a retail price of $9.99 a month next year.

“In theory, SVOD is better because you are going to minimize churn and there will be predictable cash flow. With transactional VOD, every single time you have to go through a buying decision,” [212]Media managing partner Vinod Bhat said, explaining the decision to pursue SVOD.

Like Bollywood movies, anime has its own rabid fan base. When Anime Network executives tried getting carriage on Comcast in 2002, they were promptly batted down. Comcast recommended instead that they offer their programming free on demand.

The network started offering 10 free hours and the result “was a significant fan base that was requesting our content quite frequently,” Anime Network affiliate sales vice president Kevin McFeeley said. The company estimates roughly 17% of its audience is Asian-American.

In mid-2004, McFeeley said he “went back to Comcast and positioned the product as an SVOD offering. Always keeping in mind the end-game was distribution of the linear network.”

Anime's SVOD package provides 30 hours of programming for just under $7 a month. Programming consists of shows like The All Purpose Cultural Cat Girl Nuku Nuku and Zaion: I Wish You Were Here. The same content is available on a pay-per-view basis via satellite. The SVOD product is accompanied by a free, ad-supported two-hour on-demand package. Together, the services are available in nearly 25 million homes.

Over the past year, McFeeley has been talking to cable systems, seeking carriage for the network on digital cable. The linear network is now available in 1 million households.

“SVOD is not a bad business,” he said. “At the end of the day, this business is predicated on ad sales. We do not include advertising on our subscription packages. Linear distribution represents a much more robust business model.”

While World Wrestling Entertainment shows such as Raw and SmackDown get plenty of broadcast distribution, the company also offers subscription and on-demand programming.

“We came up with SVOD because we have 75,000 hours of original programming, and we have a passionate fan base that will buy it,” senior vice president of WWE affiliate sales and marketing Peter Clifford.

Wrestling is consistently popular with Hispanic viewers. SmackDown is typically one of the top 10 highest-rated English-language programs among Latinos. Reruns of Raw are among the highest-rated programs on Latino youth network mun2. According to WWE spokesperson Gary Davis, 17% of the SmackDown audience is Hispanic.

WWE provides Spanish-language on-demand fare to Cox Communications and other operators. It opted for transactional on demand rather than a subscription model because of a lack of Spanish-language content. Announcers Carlos Cabrera and Hugo Savinovich are now in the process of narrating in Spanish dozens of hours of classic wrestling matches, which make up much of the offering's content. WWE views VOD as a way of introducing Hispanic viewers to the English-language SVOD

“It is not a great leap to think that Hispanics who purchase transactional VOD would enjoy the SVOD product. After all, the fans are bilingual,” said Clifford. “With the right type of content and marketing, SVOD is a viable option to meet the needs of viewers and make some money.”

Kagan Research estimates that SVOD will generate $247 million in revenue this year and $688 million by 2011. There is no breakdown of how much the handful of multicultural subscription offerings might earn this year, but it is a tiny piece of the overall pie. “Cable operators realize they can get more subscribers by targeting minorities with [free] VOD,” Kagan analyst Deana Meyers said.

For their part, many Hispanic programmers seem pleased with free VOD. “We look at it as a marketing vehicle to get the brand to as wide an audience as possible” said Chris Firestone, executive vice president of operations at Firestone Communications, which owns kids network Sorpresa. Firestone said they are trying to sell ads for their VOD fare.

Approximately 95% of Comcast's VOD is free, including all of its Hispanic content, which averages between 140,000 and 150,000 orders a week. Movies account for roughly 40% of all orders. Comcast makes 125 hours of Hispanic VOD available per month, but only to those who already subscribe to a Hispanic tier. “We try to bring an added value to the community,” said Panzera. In effect, the 'free' Hispanic VOD offerings soften the blow of paying for a separate tier.

Panzera does not rule out the possibility of a Hispanic SVOD offering, but he is not enthusiastic about the idea.

Next year, Schramm intends to begin selling a SVOD network called Barça TV, featuring the Barcelona soccer club. No doubt others will follow, but free on demand should eclipse SVOD in the Hispanic market for the next several years. Its primary role will continue to be to attract and retain Latino subscribers.

The same is true of the African-American market where SVOD networks will also be few and far between. But free VOD does not exclude the possibility of making money.

H.B. Holmes a Lakeland, Fla., minister and video-on-demand entrepreneur targets what he describes as the “urban, faith-based community.” The president and CEO of HBTV on Demand persuaded Comcast to include some of his shows on VOD starting in September. One of the first programs was an infomercial touting a DVD titled Love, Sex and Lasting Relationships and produced by the Tampa-based Pastor Greg Powe. The infomercial was available only on Comcast's free VOD for one month during which it prompted the sale of 10,000 DVDs at $19 a piece.

A pay-per-view concert featuring Gospel music star Juanita Bynum and jazz musician Jonathan Butler is currently available on Comcast's VOD. Holmes said “We are hoping the Juanita Vitem piece will generate 100,000 buys at $9.95.”

Comcast is putting some marketing muscle behind that effort by running spots on various networks. Phillip Woodie, director of multicultural sales at Comcast Spotlight said the concert is a “test of the power of VOD.” If successful, Woodie might try and sell a title sponsorship to a similar event in the future.

Comcast has yet to persuade a single advertiser to buy space on multicultural VOD despite strong consumer demand. This is partly because of legal and technical difficulties, but also because media buyers remain skeptical. Holmes, though, is confident of the moneymaking potential of free on demand. “I believe when opportunity meets preparation you see undeniable manifestation,” Holmes said.

The importance of transactional and free VOD for multicultural audiences has been firmly established in the space of just a few years. Multicultural SVOD is just getting started. The first Bollywood subscription service just launched a few months ago and the success of the Anime Network's SVOD offering is largely due to an audience outside the Asian-American market.

For now, the potential of multicultural SVOD remains largely a matter of faith and promise.