Video services

Dreaming of VOD Gold

9:45 AM -- NEW ORLEANS -- Although video on demand (VOD) has finally taken off in popularity in recent years, the cable industry is making far too little money on it, according to several top MSO and network programming executives.

Speaking at The Cable Show here Monday, the execs declared that the industry must start “monetizing” its VOD assets through targeted, interactive advertising ventures like the new, national Project Canoe venture. Otherwise, they implied, VOD’s great ad potential will never be realized and the Internet will continue to suck advertising dollars away from the TV medium.

Comcast Corp. (Nasdaq: CMCSA, CMCSK) COO Steve Burke sounded the alarm first, calling on cable operators and programmers to be much more creative in using VOD technology. He noted that the industry has relied on just “two main models” for on-demand offerings so far: pay-per-view (PPV) movies and TV shows that are offered free for a short period of time.

“We have this wonderful engine that we’ve created in tens of millions of homes, but the creativity to drive it into different places doesn’t really seem to be there,” he said. “We’re using VOD in a very limited way.”

Cablevision Systems Corp. (NYSE: CVC) COO Tom Rutledge seconded the notion, arguing that programmers have not taken nearly enough advantage of the increasingly popular VOD format.”Our platform is very underutilized,” he said. “Our network can be used in a much greater way.”

Spotlighting Project Canoe, the interactive advertising standards-setting group formed earlier this year by several large MSOs, top cable officials said it will be the first step in their new drive to rake more dough from on-demand content. In addition to promoting targeted, interactive commercials, Project Canoe will seek to build ratings and other measurement tools for VOD.

“It’s all about dynamic ad insertion,” said Time Warner Cable Inc. (NYSE: TWC) COO Landel Hobbs. “The key is working on this as a sector.”

With Project Canoe now staffing up, Burke said the group’s new executive director will be announced June 1. “We have high hopes for it,” he said.

Besides inserting targeted, interactive ads, Burke suggested that MSOs could use the VOD platform for “electronic sell-through” of various products, more subscription-on-demand offerings, network DVR services, and more products like Time Warner’s popular StartOver and Look Back time-shifting services. A big fan of StartOver and Look Back, Comcast is now staging field trials of its own version of these two services.

Hobbs noted that StartOver continues to draw raves from the company’s digital subscribers. In Time Warner’s customer surveys, 93 percent of subscribers say they’re satisfied with the service and 76 percent say they would recommend the service to a friend. StartOver users also report that they are more attracted to the networks enabled with the service.

“We are seeing nothing short of the evolution of VOD,” he said. “We all wish it would go faster.”

Rutledge related that Cablevision has started tinkering on the sell-through front with its new Popcorn DVDs-on-demand service. The service allows consumers to buy movies electronically and watch them immediately on their TV sets while waiting for the actual DVDs to be shipped to their home.

“It’s not priced properly and the inventory is too limited for it to be a huge success at the moment,” Rutledge said. Plus, he noted, “it’s not electronic delivery.” But, while it’s still in primitive form, it could prove quite promising, he said.

— Alan Breznick, Senior Analyst, Heavy Reading

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