Is Video In Demand?

Deals in the video-on-demand market are once again revving up debate as to whether these applications can help kickstart the telecom industry.

Up to now, the digital video market has been a question mark (see Digital TV: Who'll Tune In? and We Want Our Packet TV!). Folks haven't seemed eager to use their computers to rent movies if it's easier to drive to the corner store or use pay-per-view services.

Now that seems to be changing. According to Tom Nolle, president of consultancy CIMI Corp., customers like movies that can be downloaded via the Internet and then played and replayed at the customer's behest, with pauses for pit stops and snack retrieval. Two deals, announced today, put the spotlight back on the market:

  • SkyStream Networks Inc. announced $4 million in new funding from several investors, including Amerindo Investment Advisors Inc., AOL Time Warner Inc. (NYSE: AOL), Comcast Interactive Capital, and Shaw Communications Inc. The input completes SkyStream's fifth round of funding, the majority of which closed back in March 2003 and now totals $29 million for this year (see SkyStream Scores More).

    SkyStream CEO Jim Olson says the funding will be used to increase development around its Mediaplex product line, which converts analog video signals to digital ones for use on packetized networks (see SkyStream Wants Its IP TV ). The multiple systems operators (MSOs) that are helping will also direct R&D for the product, ensuring it meets what's shaping up to be a big market in video-on-demand and interactive TV, Olson says.

  • BellSouth Corp. (NYSE: BLS) announced a partnership with Movielink, an online video rental provider, to enable DSL customers to download movies via the Internet, then play them separately on home equipment. In its press release, BellSouth cites figures from GartnerG2 that indicate the market for video-on-demand from cable TV operators could hit $2.8 billion by 2006 (see BellSouth Goes to the Movies).

Such market research figures, as they often are, may be overly optimistic, but analysts see things heading in the right direction.

CIMI Corp.'s Nolle notes that the model acording to which films are downloaded to a hard drive and played back at the customer's convenience makes it easier to apply encryption and license control as well.

In BellSouth's new service, for example, customers pick movies on their DSL screens and pay between $2.95 and $4.99 to download (pricing is set by the movie studio that distributes the film). Flicks can be viewed on the computer, or transferred to TV using a set-top box, anytime within 30 days. Each customer has 24 hours to play, replay, stop, and start the video, which is copy-protected. Nolle thinks it could be an $8 billion to $18 billion market annually.

Other IP video options have emerged. According to media and entertainment analyst Adi Kishore of Yankee Group, another big market is forming among cable TV providers that are eager to offer video rentals, not on the Internet, but on their own dedicated networks. The technology involves streaming video from specially designated servers. The speed of delivery is faster than store-and-play via the Internet; delivery is straight to the TV; and the quality is significantly better than what can be obtained on a computer monitor.

Kishore says streaming video services from MSOs are growing faster than downloads. He estimates that 10 million to 11 million cable TV users in the U.S. now have access to services from their MSOs, and that by 2007, 32.5 million will be using such services.

Counter to this view, Nolle says streaming video involves a range of problems not common to video on demand, since greater scaleability, security, and administrative options are required. This, he feels, could hinder its spread among RBOCs.

One thing all parties agree on is that video is on the rise. While kinks remain to be worked out, service providers and vendors think consumers are ready for more video from their Internet providers, and vice versa. They're starting to see the synergies among PCs, phones, and other gear lying around their living space.

On the way to market expansion, there will be some false starts and dead ends, as service providers of all kinds find a niche. "You're going to find a lot of strategies hybridized, as cable and satellite providers and RBOCs extend video over their networks... but there's no question that digital video content will be a powerful revenue generator in the future," Nolle says.

— Mary Jander, Senior Editor, Light Reading

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Y2KickIT 12/4/2012 | 11:32:43 PM
re: Is Video In Demand? Cable television is largely a U.S. phenomenon; most of the rest of the world get television from satellite.

Much of Asia and most of the developed nations are either ahead of the U.S. in broadband access or moving much faster to deploy advanced technologies.

The RBOC FTTP RFP? When and where do you think they will deploy? Greenfield FTTP will take up the available budget and if they can get the regulations written the way they want then fiber DLCs will also be exclusive and they can cut competitors off from legacy plant, which means most of us still have copper.

Japan and Korea are building FTTP now. Japan has over 10.9 million broadband subscribers, 458,293 of which are FTTP, 60,000 of which subscribed in June alone. http://asia.cnet.com/newstech/...

Anyone who thinks the U.S. just must be number one is delusional, doesnGÇÖt read much, and hasnGÇÖt traveled.
rjmcmahon 12/4/2012 | 11:33:49 PM
re: Is Video In Demand? The MSOs are all about providing an ever-increasing amount of content and services over that COAX cable.

This is the rhetoric being pushed on the public by both the cable cos and the FCC.

Looking a bit more closely reveals, the MSOs are broadcast entities. They prefer large audiences sitting behind one event. Their primary goal is to strengthen their negotiating position with the content refineries so they can make more money for themselves during these events.

A bandwidth abundant, unicast capable, content direct model cuts them out of the loop completey. It allows consumers to negotiate price (and schedule) with the content refineries. And most importantly, it enables new generations to produce product for unicast sized audiences without the need for so many sponsors.

When will the MSOs and FCC fight for honest principles instead of hijacking our communications infrastructure and calling it broadband?
alchemy 12/4/2012 | 11:33:53 PM
re: Is Video In Demand? The Comcast model is to give a certain amount of Video on Demand away for free in the hope that a fraction of their customer base will get hooked on the heroin. For a small monthly fee, you get a set top box that has unlimited access to content like news programs and other programming. The big flaw is that VoD in the MSO network doesn't use DOCSIS so there's a lot of redundant equipment in the cable head end to mix VOD and DOCSIS signals. Expect DOCSIS set top boxes in the near future that can do IP Streaming Video, IEEE 802.11, and 900 MHz home wireless telephony. The MSOs are all about providing an ever-increasing amount of content and services over that COAX cable. That keeps their customer base from jumping to DirectTV and lets them mine more dollars per month out of their customer base.
cc_junk 12/4/2012 | 11:34:13 PM
re: Is Video In Demand? Reponse to PackMan #26:

"It takes 2.5-3 Mpbs using MPEG-2. Thus it is very viable even over commonly-available heavy-rate DSL. I know this. I work on it. So don't tell me it can't be done."

Sure it could be done.

Sure your isolated DSL access connection can handle it for a couple hours. But your access technology doesn't mean the network and application servers/systems can handle this service at volume. Suppose everyone was doing it with several hundred thousand full length DVDs being downloaded across the country every day. Forget the Internet backbone, your stream couldn't even make it through your DSL access provider network whose great "access speed" you are touting. Some of those providers are known to overbook their aggregation networks 100:1. Do you have the business case for them to spend a huge amount of money on their network to only get $20 per sub? (actually, I think most consumers are thinking that somehow they might get the movies for free with that $40-50 monthly DSL fee).

Today's Internet could not handle this service at volume. It will require a lot of money/investment to accomplish what you are suggesting.

Sure it is possible with the technology, but I saw enough technology stories with no business case in the bubble to not get excited about big technology stories alone. [Besides the dot.bombs, try this story on the investors in the Chunnel or the Boston Big-Dig].

But if the true costs of providing this service at volume gets passed on to you do you think it will still be competitive with netflix?

Of course the content providers and equipment vendors (the voices from Silicon Valley/Seattle lobbyists) believe that the investments should be made in the network to carry services like video-on-demand at volume. Easy for them to say - for the former it isn't their money and for the latter it's money going into their pocket. But they say that the provider network services should be kept cheap for their own personal gain. "The service providers are charging too much" (meanwhile the "Cisco and Junipers" run with %50+ margins while the providers run negative margins)

Of course, also from the same constituents not only should the network be cheap to build, but (quoting our poster rjmcmahon) have "operational costs orders of magnitude cheaper" (orders of magnitude? a little hyperbole). What is the basis for this supposition? What providers quarterly reports support this?

For the largest internet backbone that I am familiar with the operational costs per port and per $ revenue are far higher (one order of magnitude? :-) than any of the voice or private line or FR or ATM services. The customer care and network facing ops are much larger than for the other service ops yet for much smaller services. [I don't size a service by the number of bits carried, but by inservice ports or revenues - ports because operational costs are highly correlated with ports while less correlated with port speed or utilization.] To be fair, some of that opex is due to a higher service "add" rate of the Internet service compared to the other services.

sgan201 12/4/2012 | 11:34:15 PM
re: Is Video In Demand? Hi Packman,
Now, I understand where you are coming from. You are working on a science project with no real bearing on actual business model/venture.

In 20 years, I hope we have better things to do with our life than spending all the time watching movies. I do not even watch TV or movies nowaday.
PackMan 12/4/2012 | 11:34:24 PM
re: Is Video In Demand? I realize there are different solutions for VoD, but *A* solution is real-time streaming video, from a centralized server or nearby cached source. Yes it is buffered on the local CPE for functions like pause and fast-forward. However you don't have to wait 20-30 minutes to start watching it, and it doesn't take 10Mbps or 80Mpbs. It takes 2.5-3 Mpbs using MPEG-2. Thus it is very viable even over commonly-available heavy-rate DSL. I know this. I work on it. So don't tell me it can't be done. In my opinion this is the *best* solution.

All other things being equal, given a choice between selecting any movie they want and watching it either now or later, vs. selecting any movie they want and having to wait 20-30 minutes (via download or Blockbuster) or several days (Netflix), how many customers do you think would choose the latter?

Certainly the cost of the service is more now for online VoD, due to the costs of upgrading the network to support it. However the same was true of the PSTN when it was first created as well, as an alternative to letter-writing. The first users of the PSTN were only rich guys due to its extraordinary costs. Eventually however it became the more prevalent communication medium due to its speed and much greater bandwidth vs. writing letters.

I'd love to re-visit this in about 20 years.
PackMan 12/4/2012 | 11:34:25 PM
re: Is Video In Demand? Come on man - mass imported labor? This would provide all kinds of issues with security, labor unions, etc. I don't think it's a great suggestion to put thousands of Americans out of work. Even so, there's already tons of cheap labor here, recently influxed from our neighbors to the south, that I'm sure would fit the bill.
rjmcmahon 12/4/2012 | 11:35:00 PM
re: Is Video In Demand? just pure hard working guys

and gals.
lastmile 12/4/2012 | 11:35:01 PM
re: Is Video In Demand? About 3 years ago VOD was supposed to be a killer application but it never happened.
True Video On Demand is easily feasible but it requires a tremendous amount of bandwidth and Bandwidth requires fiber.
It is the labor cost of deploying Fiber that is delaying VOD (and every other killer application) in the US.
Labor is inexpensive (not cheap!) in ASIA. Screw all the technology that makes life great. Technology can happen only when the basic infrastructure is in place. Fiber is an infrastructure that requires labor and not brains.
The labor that does work, does not care about 10 Gigs or 40 Gigs or VOD.
In ASIA labor is cheap. And that is why ASIA will dominate the the US in terms of high quality communications.
If you do not believe me visit Korea and India. If I had visited China during the last few months I would have added China to my list.
I think it is time for Congress to step in and help the US maintain it's technology lead by passing a short term inexpensive (not cheap!) labor bill that will help us import labor to deploy badly needed fiber. No H1 No L1 just pure hard working guys.

sgan201 12/4/2012 | 11:35:01 PM
re: Is Video In Demand? Hi Packman,
Please do your home work before you write any message. You have no idea between PPV and Video on Demand.. Video on Demand is not Video streaming. It is a virtual VCR type of service where the user can pick any movie in the library and the movie is partially or fully downloaded to the setup box. The viewer can fast forward or re-play or pause the view like a real VCR.
What is in the hotel is Pay per view..
If you cannot control the viewing like a real VCR, it is not video on demand..
Due to that "VCR" like function, the bandwidth has to be higher than video streaming.

Even let's say 10Mbps is fast enough, how many homes in USA has 10Mbps Internet access now??
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