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Video-on-Demand Packs a New Wallop

The industry may still be fixated on IPTV, VoIP and DVRs, but the buzzword at last week’s National Show surrounded an oldie-but-goodie technology: video on demand. In fact, VOD and pay-per-view haven’t generated as much talk amongst industry executives and observers since the heyday of Mike Tyson.

But much like Mighty Mike in his most recent fights, the great revenue and competitive promise of on demand could be KO’d by an emerging video broadband business, if the industry takes the impending threat lightly.

The video broadband platform is already throwing jabs at operators courtesy of The Walt Disney Co., which has very conspicuously bypassed cable’s on-demand services, offering its popular cable and broadcast television shows to other alternative distribution platforms, including broadband video.

Disney in particular made the neck hairs of many cable-system executives stand up during the National Show by announcing it will distribute episodes from four series on broadcast-network ABC’s schedule — Desperate Housewives, Alias, Lost and Commander In Chief — via its Web site (, hours after the respective episodes air on the network.

But operators shouldn’t have been surprised about the move. Disney has been telegraphing its eventual video broadband one-two punch to the VOD business since last October, when it set its groundbreaking pay-per-download deal with Apple Computer Inc. It then launched the gated video broadband site ESPN360, where it offers video streams of many live college basketball and football games, alongside ESPN’s traditional telecasts. A second gated, video-enhanced site for SoapNet will launch later this month.

Two months ago, Disney said it would offer popular tween-targeted Disney Channel series That’s So Raven, The Suite Life of Zack & Cody and Kim Possible, free and on-demand, with commercials, at an enhanced


Yet the cable industry was still shocked and hurt by Disney’s most recent video-streaming announcement. That’s mostly because ABC did the deal without the industry’s blessing — and sans cable’s VOD infrastructure to deliver it to paying subscribers. Instead, the programmer chose to offer it free to anyone with a high-speed Internet connection.

In fact, Disney has yet to reach any major VOD deal with operators for its cable or broadcast content, aside from a subscription on-demand agreement with Cablevision Systems Corp. for Disney Channel fare.

The jury is still out on whether Disney’s broadband stunt will turn into a new, lucrative distribution platform for the company and the 10 advertisers who signed up for the two-month trial. It’s one thing to spend $1.99 to download an episode of Desperate Housewives you might have missed, to watch whenever you want to on your iPod. It’s quite another to watch that same episode, with commercials that you can’t skip through, on your 15-inch office computer screen during lunch or on your laptop at home.


And Disney is treading down a slippery slope by offering marquee content for free over the Web, while charging pay TV operators a license fee to air the same product on its linear channels. Some providers feel it’s only a matter of time before Disney comes knocking on cable’s door, bearing its content for VOD distribution.

“If they can make a VOD strategy work on an advertising model, that’s OK with me. They’ll be coming to me anyway, soon enough,” said Insight Communications Co. CEO Michael Willner.

Still, operators should be very concerned that Disney right now is in the corner of the underdog video-broadband platform as that technology prepares to challenge cable’s undisputed VOD supremacy.

The video quality and reliability of cable’s on-demand service is still vastly superior to the Internet, but MSOs can’t afford to get complacent or cocky.

The cable industry and content providers are going to have to find a happy medium for distributing quality on-demand content, otherwise cable may lose its VOD business to a competitor that right now, pound-for-pound, shouldn’t be in the same ring. But then again, stranger things have happened.

Anyone remember Buster Douglas?