When Local Is Focal

Local on-demand programming — long associated with dreary city council meetings — has become an exciting business opportunity for cable operators.

“Cable's local presence and, more recently, its video-on-demand platform have been competitive differentiators against satellite,” said Comcast senior vice president of new media Matt Strauss. “Now, we are finally coming to the point where we're putting those two together and offering local on-demand services that are really unique. We are just beginning to tap into their potential, but we see it as a tremendous opportunity.”

To capitalize on that opportunity, Comcast has been rapidly rolling out localized VOD services such as video dating and pet adoption at a frenetic clip over the last year. But it isn't the only MSO that has paid more attention to local on-demand content, in hopes that better programming will produce a big payoff in customer loyalty and perhaps even new revenues.

Last year, Time Warner Cable in Lincoln, Neb., began to dramatically expand the coverage of the University of Nebraska Cornhuskers football team available on its Nebraska On Demand channel. The new football fare boosted usage by 300%, making Nebraska On Demand the system's third most-popular VOD offering — only HBO and pay-per-view VOD movies attracted more unique users.

These local programs have also begun to make a direct contribution to cable operators' bottom line.

In August, the local production team put together a three-minute video explaining how subscribers could order a Huskers football game on PPV. The instructional video “became our highest-viewed piece of content that month, and it helped us break all records for PPV games,” said Nebraska system director of public affairs and community programming Ann Shrewsbury.

Less directly, the increasingly popular local content also helped the operator reduce churn and boost digital-cable penetration. About 12% of the system's digital subscribers use the Nebraska On Demand product, according to Shrewsbury.

“Among the users of local on demand, we have a much higher retention rate,” she said.

Such efforts represent a potentially important shift in the way cable operators have approached local programming.

Cable has long touted its local presence as a major competitive advantage against satellite, but for much of the industry's history, local cable programming consisted of coverage of government agencies, as well as the local-origination and public-access channels required under franchise agreements.

Now, though, many systems are beefing up the amount of content and the range of fare they offer, adding local news, sports and other content to attract a larger portion of the subscriber base.

Between the second quarter of 2007 and the second quarter of 2008, the number of local on-demand titles increased by more than one-third (34%), and the number of orders of local content grew by nearly one quarter (25%), according to Cathy Hertzel, president of the Advanced Media and Information division at Rentrak, a supplier of data about on-demand usage.

“We're only beginning to see the operators focus on local-on-demand, but they are clearly starting to see growing usage and starting to experiment with different types of content,” she said.

These local efforts will provide operators with a way to differentiate their VOD offerings from the nationwide platforms satellite providers are beginning to deploy. But it will also be increasingly important as the telcos expand their local offerings.

Recently, for example, AT&T partnered with AccuWeather to launch Weather On Demand, an interactive local weather service in five of its U-verse TV markets. The service is slated to be expanded to the rest of the U-verse footprint in 2009.

“The beauty of the IP platform is that we can bring the kind of on-demand Internet experience to the TV experience,” said Peter Tracy, executive director of programming for AT&T's U-verse, which also offers subscribers a local Yellow Pages service. “Our platform gives us the opportunity to introduce a lot of different types of local elements.”

In the cable landscape, one of the most aggressive efforts to expand local content can be found at Comcast. Several years ago, the MSO started a Select On Demand effort to create niche programming.

Following on the success of these products, which include Exercise TV and now account for about 11% of Comcast's on-demand users, the company then decided to develop local VOD products that could be tested in one market and then expanded into other systems.

The first of these offerings, Dating On Demand, proved so popular in Philadelphia that a template for local video-dating products has since been rolled out to 23 markets, according to Strauss.

Since then, the operators has also developed a local pet adoption service, which is now available in over 20 markets, a “Best of the City” service that features local restaurants and tourist attractions that has been deployed in 15 markets, and a service that profiles a city's most wanted criminals that has been customized for seven markets.

Strauss also sees opportunities in developing products with the MSOs sales arm, Comcast Spotlight, which has already deployed local classified listings for real estate and autos in a number of markets.

“Selling against this type of highly targeted local content could represent a whole new advertising model,” he notes.

Comcast is also looking to forge alliances with national cable programmers to develop additional content. For example, Strauss said, it is talking to MTV Networks about developing a “battle of the bands” service that would feature local musicians.

Few other operators have been this aggressive but a number are expanding their local content.

In Massachusetts, for example, Charter's local-origination channel, Charter TV3, is producing Worcester News Tonight, which has attracted a loyal audience with extensive coverage of local events and sports generally ignored by Boston broadcast stations.

It also produces an extensive slate of local sporting events, with as many as two or three games a week made available on-demand.

“It's been a magnet for drawing people to Charter and is a competitive advantage for us because the telcos and satellite guys don't have a service like TV3 or the local VOD,” said Michael Marcy, director of local programming at Charter TV3 and Worcester News Tonight.

Sports are also a big driver at Cox's Omaha systems, according to Cox Omaha Public Affairs video-production manager Mark Kraynak.

This year, Cox Omaha will produce 12 to 14 high-school football games, as well as 12 to 14 basketball games, telecast both on the system's local origination channel and on VOD.

“We produce them with five cameras, so it is high-quality content that has been very well received,” Kraynak said.

Overall the system, which is offering 10 to 40 hours of local content, has enjoyed double-digit growth in on-demand use of such content.

Midsized operators are also making a wider array of local content available. Karen Zelenz, senior manager of programming at Insight Communications noted in an e-mail that its systems are currently offering local news, educational content, local magazine shows and a shopping channel.

What's on Zelenz's local wish list? “Targeted content such as weekly bulletins of school functions, [local] events, town hall meetings and local election coverage,” she said.