Picture This

Learning Lessons From Netflix

6/25/2012 11:25 AM

Cable operators for years have been trying to create a video-on-demand offering that offers the best combination of quality programming, an easy-to-understand ordering interface, and an attractive and simplified search engine.

As the industry continues to refine its VOD product, it seems that competitors such as overthe-top services Netflix and Amazon are quickly becoming a viable, desirable alternative. A Parks Associates survey found about 16% of U.S. broadband consumers who watch on-demand content and 17% of premium-network subscribers have considered replacing those services with an online   subscription product like Netflix.

Netflix offers mostly library product from studios and cable networks, while cable VOD offers more episodes of current series and better windows for blockbuster theatricals. Combine that with superior video and audio quality to Netflix’s Internet-based service, and it’s hard to imagine why consumers would consider gravitating away from VOD.

Here’s a reason: Consumers consider Netflix’s $8-per month, all-you-can-eat fee to tap thousands of movies and TV series a better value than VOD, for which you need a cable subscription to access both free and premium VOD, Parks said.

Netflix’s on-demand appeal was affirmed at our On Demand Summit here last week. For all of VOD’s pluses, several cable executives say the industry still has to work on the minuses and broaden offerings if cable is going to compete with outlets like Netflix.  “I really think we are way too slow to respond to the changing demands of the customer,” Rogers Communications senior vice president of content David Purdy said during one panel, urging cable to experiment with subscription VOD concepts.

Networks see outlets such as Netflix as a way to monetize library product that cable operators either don’t want or can’t offer due to bandwidth restrictions. If consumers find the content on alternative services more appealing, cost-effective or palatable than what’s on cable VOD, it might not be long before more current and relevant programming finds its way “over the top.”

Cable should follow Purdy’s advice: Learn from competitors, and keep your customers happy.

September