Does the 'D' in VOD Stand for Defense?

During a presentation to investors in Phoenix this week Comcast chief Brian Roberts trumpeted the company's progress with video-on-demand (VOD) services. Some of the key statisticsÉ. VOD is now available to 80% of the MSO's customer base. Comcast is now offering 3,000 on-demand programs with that total expected to rise to 10,000 by year-end. Included in that total are some 200 classic movies that will be offered for free each month via VOD, mostly through a deal with Sony-MGM. Comcast expects 1 billion VOD program orders in 2005.While these usage figures are impressive, the actual financial upside from the business is less so. Indeed, Comcast's VOD strategy may be better characterized as 'video on the defensive' as the MSO currently uses on-demand programming merely as a means to add value to its core video product and differentiate its service from aggressive satellite competitors. To the point, some 85% of the VOD content Comcast offers is available for free to digital basic or premium TV subscribers and 95% of the MSO's VOD service usage falls within the free category.Comcast says its average monthly revenue per subscriber has skyrocketed from $42 in 1998 to $75 in 2004, an impressive growth curve with a five-year CAGR of 11%. Of course, the bulk of that 2004 total is still in the basic cable bucket, followed by high-speed data, which accounted for more than digital TV and advertising revenue combined. While VOD upside gets much attention, today it is primarily a tool to protect cable's core video business. It is IP services that are the force driving sizable new revenue for MSOs.