Smaller Players Find VOD In High Demand

Systems Must Push On-Demand Choices to Meet Viewer Appetites

By Todd Spangler -- Multichannel News, 7/26/2010 12:01:00 AM

In an increasingly on-demand world, smaller cable operators are being forced to pick up the pace on VOD to meet their customers’ desire for instant gratification. But that can be a challenge, as independent players may lack the resources of their bigger brethren.

Clearly, video on demand is now a crucial tool for small and midsize cablers to fight satellite and telco TV competitors. “VOD has become a table-stakes service that all cable operators need to offer,” said Joe Matarese, vice president and general manager of Arris’s On Demand Business group.

Independent operators want to bulk up VOD services to stay ahead of viewer demand, looking to add more HD titles, more day-and-date movie releases and, eventually, even 3DTV content.

Antietam Cable Television, a midsize operator based in Hagerstown, Md., has increased its video-on-demand storage and streaming capacity fourfold in the last few months under president and general manager Brian Lynch. Before he joined the operator in January, Lynch spent 18 years with Comcast, most recently as general manager of the MSO’s Baltimore system.

‘TERRIBLY IMPORTANT’
“VOD is terribly important to our business,” Lynch said. “But when I got here, we hadn’t quite had a focus on VOD in general.”

Antietam Cable currently offers 5,000 VOD assets and is shooting to hit 7,000 by year-end. That would put the operator above the industry norm: In 2009, North American cable operators offered an average of about 6,700 movies and TV programs, according to research firm SNL Kagan.

Moreover, Lynch said, the operator can get to the 10,000 mark without a major upgrade to its VOD infrastructure, which is based on SeaChange International software and equipment.

Part of Lynch’s aim in loading up on VOD is to boost digital penetration, which will let Antietam free up bandwidth for other advanced services like DOCSIS 3.0 high-speed Internet and more linear HD channels.

“In my mind, VOD is a bridge to the digital space,” he said. “Our goal is to get to a certain tipping point on digital penetration. Ultimately we want an all-digital play.”

Antietam Cable has fewer than 40,000 subscribers, of which around one-third take digital cable. Lynch has set a target of 60% digital penetration by the end of 2011.

For Sunflower Broadband, a 30,000-subscriber operator in Lawrence, Kan., the priority is to keep pushing more VOD titles and, in particular, more HD. In addition to satellite competitors, Sunflower is facing AT&T’s U-verse TV expansion in its footprint.

The operator has filled 17 out of 21 Terabytes of its SeaChange VOD storage, representing more than 6,000 assets and about 5,000 hours of video. Sunflower just put in an order for more storage — to provide another 5,000 hours, programming manager Andrea Pritchard said.

“We have more plans to grow the content, and I do think HD is going to be a priority,” Pritchard said. Sunflower presently offers 500 HD on-demand choices.

For independent operators, another big part of the VOD play is adding localized content, such as high school sporting events, political coverage and ethnic programming, said Brian Matthews, chief marketing officer for Avail- TVN, a VOD and programming aggregator.

“They’re more of the fabric of the community” than larger MSOs may be, Matthews said.

UPGRADES REQUIRED
Still, Arris’s Matarese said, many smaller operators are just in the early stages of getting their arms around VOD compared with larger MSOs. One of the issues is that operators have to make the commitment to upgrade their plant to be fully two-way capable.

“It takes a little bit to understand what’s going to be involved,” he said.

Arris has been working with Comcast Media Center to offer the turnkey “VOD in a Box” service that provides equipment, management and content rolled into one. The service, targeted at systems with between 10,000 and 20,000 subscribers, has a customer base in the “double digits,” Matarese noted —“but there are triple digits of potential customers out there.”

Jon Shaver, Comcast Media Center director of content development, agreed that selling VOD solutions to smaller independent operators has been “a little tougher hill to climb.”

More aggressive operators are deploying traditional VOD solutions, while the managed VOD in a Box solution can provide up to 2,000 hours of video to help cable providers get up and running with a credible offering.

“Once you start to scale above 2,000 hours, there’s a stronger economic argument for an in-house VOD solution,” Shaver said.

And everyone wants to add more content.

Smaller operators that offer 1,000 to 2,000 hours are “aspiring” to 3,000 to 5,000 hours, Matthews said. By hitting the 5,000-hour milestone, “that brings them to par with or differentiates them from their competition,” he said.

In some cases, an independent operator finds its VOD lineup being compared to that of a larger cable operator in an adjacent market. “They have to match what the big guys have because their customers are exposed to the same marketing messages,” said Sanjiv Moré, SeaChange senior director of advanced advertising and VOD sales.

SeaChange offers a turnkey solution aimed at operators with fewer than 20,000 subscribers, called VOD Now, in conjunction with Avail-TVN. The smallest operators are looking for their vendors “to hold their hand a lot more,” Moré said. “They’re a little more reactive than proactive. And those customers continue to come forward, but the economy’s been tough on these little guys.”

That said, smaller operators are interested in exploiting newer VOD technologies and business models.

EAGER TO ADD ADS
Advanced advertising, to be able to add dynamic VOD ad insertion, has garnered a lot of interest among smaller and midsize cablers, Moré said. “They’re already running traditional local spot sales and they could easily add VOD ads to the inventory mix,” he said.

Smaller operators are also actively exploring “TV Everywhere” concepts, to deliver on-demand content to PCs and mobile devices, much as the major MSOs are.

“I think the big piece is going to be online on-demand,” said Jaime Montes, video product manager at SureWest Communications. “That’s going to be cool. And we could charge a couple of dollars per month to watch TV Everywhere online.” SureWest has 58,600 video subscribers in two clusters in Sacramento, Calif., and Kansas City.

But there remain disadvantages to being a little guy. For Antietam Cable’s Lynch, perhaps the biggest challenge has been obtaining the content itself — an issue he had not encountered at Comcast.

“One of the things I was surprised by was, one of the main programmers wasn’t giving us all the [VOD] content I think they should have been offering,” he said, declining to identify the programmer. “They said, ‘You’re on the B package for on-demand. But if you take this channel we’ll put you on the A package.’ ”