Formulas for VOD Success
Programmers, Operators Seek Models to Make VOD Pay Off
by Craig Kuhl -- Multichannel News, 7/27/2008 8:00:00 PM
As the call for video on demand keeps growing, operators and networks continue to define and refine their VOD game plans. On-demand strategies run the gamut from brand building and customer retention to revenue generation, but the bottom line is the same: Strategies may vary, but you'd better have one.
“There's really not just one VOD strategy that fits all,” said Gary Traver, senior vice president and chief operating officer of Comcast Media Center. “Just taking linear programs and putting them on VOD won't work. There are opportunities for niche networks to expand their client base, but you've just got to understand the strategies of VOD.”
The stakes are worth the challenge: In 2007, MSOs took more than 3 billion on-demand orders (excluding adult content), according to Rentrak.
Comparing first-quarter 2008 data to the same time frame last year, Rentrak found that VOD viewing increased by 59%, while video-on-demand content available was up 36%.
Also raisisng the bar are technology and consumer expectations. Comcast, for instance, will offer 1,000 high-definition choices via on demand this year, and expects to offer 3,000 HD movies on demand next year.
For many programmers, VOD is a promotional tool to draw viewers to linear networks. “We now understand the sampling value of VOD, so our strategy is to provide a showcase for our networks and reinforce their value,” said Will Flannery, vice president of advanced services for Fox Sports Networks. “There's a modest revenue stream, but the benefit now is the promotional value.”
Rebecca Glashow, vice president of digital media distribution for Discovery Networks, sees VOD as a perfect platform “to launch and promote new networks like Planet Green. We can use VOD to introduce and support new shows and test new concepts.”
As AMI Rentrak president Cathy Hetzel points out, more content — much of it being offered before its linear debut — is being directed toward VOD. “We'll see that strategy more in the future,” Hetzel said. But, she added, “the next phase for VOD must be a self-sustaining model and actual dollars that come with it.”
Discovery's Glashow agrees that “we need to monetize VOD and find better tools like ad insertion. Because revenue from VOD is absolutely our goal.”
But, while VOD has emerged as a go-to device for customer retention and brand awareness, the platform's prospects as a serious revenue generator through advanced advertising — VOD's Holy Grail — remain elusive.
“All agree, they must get VOD advertising,” said Traver. “They're getting pre- and post-roll ads, but they're not being inserted locally, so it limits advertising revenue for operators and programmers. We won't see real growth with VOD until we get that operational. For now, VOD's real value is in eyeballs and helping to drive awareness and retention.”
To that end, programmers feel compelled to include VOD among their offerings, if they are to compete effectively in the marketplace.
“We hope to make money from VOD, but if not, we still must do it, because there's a perception that being a real, true state-of-the-art network requires you have all the offerings — HD, broadband and a VOD strategy,” said Tom Hornish, COO of the Outdoor Channel.
For Outdoor, that strategy includes a 25% weekly refresh rate and a growing amount of high-definition content for video on demand.
Ovation TV also views HD as a key part of the on-demand mix. “We knew HD would be important to our VOD strategy, so we shot in HD, like Art in the City and offer HD content, along with [free] VOD as a value-add,” said Ron Garfield, COO of Ovation. “Our strategy is to increase local and HD content across multiple platforms.”
Lori Conkling, executive vice president of distribution for Lifetime Networks, sees it as a matter of taking a holistic approach: “We can only maximize the distribution of content if you look at it holistically,” she said. And that means “VOD must be part of every programming discussion.”
But Conkling also concedes that “we're all trying to figure out the advertising piece” and “there's no real model yet” for monetizing on demand.
To that end, she said that a key part of Lifetime's strategy is to address the need for “good tracking and measurement methods.”
ESPN senior vice president of video distribution Matt Murphy sees video on demand as “an evolving process.” While “it's very complex and we're still learning, with hurdles such as navigation and monetization,” Murphy said that this is no time to be “sitting on the sidelines.”
The folks at Showtime would agree.
“Thirty-five percent of all households have access to VOD,” said Tom Christie, executive vice president of affiliate sales for Showtime Networks. “It's a very significant strategy for us.”
The premium network's strategy includes offering an entire season of a returning series on free VOD in order to generate interest in the show's upcoming season. “In the fall, we'll have the third season of Dexter and second of Californication,” Christie said. “We'll take the first season assets and make them available on FVOD and grant the rights. VOD is a perfect way for customers to get caught up with shows and a tremendous value-add for us.”
For subscription VOD provider World Wrestling Enterprises, the smackdown value of VOD is obvious: 40 hours of content a month at $7-$8/month and a multimedia strategy to promote it.
“We theme each month, so we're not just slapping product onto the menu,” said Peter Clifford, senior vice president of distribution and affiliate sales for WWE. “In January we moved all pay-per-view and TV shows to HD and we're building an HD library. We'll also upconnect the library to HD and to the FVOD business,”
Still, for an SVOD network such as Here, the platform can be a mixed blessing.
“Getting people used to on demand is a challenge,” said Paul Colichman, CEO of Regent Media, which owns Here. “There's still a big education process required about what SVOD service is, even though we're available in linear in some markets. We've found it is easier to understand how to buy us if there's a linear service.”
Still, with all its challenges, Colichman is quick to add that “VOD is a strong competitive edge.”
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