Cable Operators

Ops Sharpen HD Content Plans

9/29/2006 8:00 PM Eastern

With more subscribers buying high-definition TV sets and a new wave of HD DVD products set to hit the market, cable operators also are raising their resolution by adding HD video to their on-demand content lineups.

Despite the fact HD video streams soak up five times the bandwidth of a standard video stream and require that much more server disk space, those in the VOD food chain see it as a necessary step to stay ahead of their telco competitors and keep up with viewer demand for higher-quality video.

Comcast Corp. has taken the biggest step toward HD on-demand, announcing last month that it will offer 100 hours of high-definition video, including at least 20 movies provided by Starz Entertainment Group LLC. That content started literally with a roar with the Sept. 15 debut of The Chronicles of Narnia: The Lion, the Witch and the Wardrobe.

Early numbers are favorable, to say the least. In the first two days that the fantasy film ran on HD On Demand, it drew at least 10,000 views, Comcast senior vice president and general manager of video services Page Thompson said.

Comcast’s decision to add HD programming to on-demand is part of its major high-def push for the second half of this year. That includes a series of new linear HD channels, and now the HD VOD content as well — just in time for the start of the holiday retail season.

“We had done some tests in Salt Lake City and Richmond, Va., with expanded HD offerings, and they went very well,” Thompson said. “So we decided the time was right to expand to 100 hours of HD.”

With more television content going HD, it is not surprising on-demand programming is following suit. And Starz believes that content will be mostly movies, said Bill Hoagland, Starz vice president of on-demand service.

“We are in a fortunate situation where we have the rights not only for standard def but high-def,” he said, adding that Starz believes that movies will be a primary driver for HD on-demand. “With our studios we have a good array of movies to provide our customers.”

UPPING THE VIDEO ANTE

Why is HD on-demand surfacing now? For Comcast, the rollout comes at a time when more consumers are purchasing HDTV sets.

“As people buy an HD set, it’s an excellent opportunity for them to consider who their video supplier will be,” Thompson said. “We think through the combination of the features that we offer Comcast really is the easy choice for HD service.”

More important, HD VOD content was a top item on customers’ wish lists, according to a recent Comcast customer survey.

“And specifically, what they said they wanted to watch most was movies,” Thompson added.

Others see HD VOD as a strong weapon cable can use to stay competitive with telco and satellite competitors. On-demand video systems provider SeaChange International Inc. has been fielding queries from its cable customers, and it has upgraded its video processing and storage systems to be ready for an influx of HD content.

“All their premium customers have HD, and you don’t want to lose those people — especially as Verizon [Communications Inc.] and others are starting to roll out services with fiber to the home,” said SeaChange vice president of business development Tom Rosenstein.

At the same time, operators also must contend with the long-awaited arrival of Blu-ray DVD players and recently announced releases of movies using the high-resolution video format. Since on-demand content is often compared to DVDs, Blu-ray DVDs will likely up the ante for on-demand video quality.

“More than anything else, for the Blu-Ray they are pushing for a lot of releases in time for the holiday season,” said Dom Stasi, TVN Entertainment Corp. chief technology officer. With that it appears the DVD format is going to achieve a consumer critical mass, “and it is probably going to be a big deal this holiday season. I think after the fact that will drive a lot more interest on the VOD side to move to HD.”

TVN provides the core transport funneling content from programmers and movie studios to cable on-demand servers. And with momentum building behind higher-quality video, its clients have started exploring the possibility of HD on-demand.

“We’re getting lots of queries, but I think it’s more informational to help them with their planning,” he said. “In predictions, I’ve been saying all along that 2007 is the year of HD on-demand, and the stars are aligning.”

LOAD ISSUE

To support that, TVN has already tested HD on-demand delivery systems including encoders and encryption systems using the most common 1080i and 720p HD formats, and it has made sure its delivery network can accommodate the higher-resolution content. But it has been more or less waiting for its client programmers to ask for systems that can support on-demand HD content delivery, Stasi said.

From a processing point, adding HD VOD content is a heavy load. HD files require more of just about everything — more time to process and encrypt the files, more storage space and longer stream delivery times.

That’s because HD means hefty file sizes. A standard definition MPEG-2 (Moving Picture Experts Group) file takes up about 2.7 Gigabytes of disk space, but an HD file takes up anywhere from 8 GB to 10 GB.

That size means it will take longer to encode and add protective encryption. For an HD file, it’s like “saying 'OK, work on this thing really fast so that I can transmit it and get it out to my affiliates,’” Stasi said. That affects all aspects of the process of translating video onto on-demand servers, so “all of that has made any HD decision a cautious one.”

For its part, TVN has tested the necessary encoders and encryption systems. All it needs now to flip the switch on HD on-demand video delivery are the machine controls — the crucial systems that automatically translate video from tape or computer file to a VOD file in real time, allowing for content to be quickly added to servers.

“If we got an immediate order right now, with somebody that said 'OK, I want you to start right now doing HD on my channel with 10 features in HD every month, we’d probably still be three or four months away from implementation end to end,” Stasi said.

Comcast has been anticipating HD content as part of its On Demand service from the start, so it has already built its delivery systems to accommodate fatter HD video streams, Thompson said.

“We continue to improve our VOD offering and we continue to add capacity as needed, but fortunately we started with a fairly large and robust system, so really the enhancements we have made have been minimal in terms of cost relative to all of the other costs we have here at Comcast,” Thompson said.

While HD video does have its burdens, helping matters for now is the fact that is will be a relatively small segment of the overall VOD picture. Even for Comcast, the 20 or so movies it will add in HD will be dwarfed by its 7,500-title library of standard-definition video.

“They are not talking about high levels of ingest for HD — it’s not thousands of hours being uploaded every week. It’s 100 titles, and there is plenty of capacity to support the encryption there,” Rosenberg noted. Given HD also is in the vast minority among linear TV channels, on-demand HD “will probably mirror what you see on the broadcast side.”

But that relatively small volume of HD content is itself another issue. While Starz has forged all of its distribution contracts with movie studios to allow on-demand releases in HD, how much content actually is offered in the higher-resolution format depends on how much space operators allow for it, Hoagland said.

For example, the new Comcast On Demand HD content represents only 3% of all of the video Starz provides.

“Right now, we are only launching the service with Comcast, and they are at 100 hours right now,” Hoagland said. “But I can tell you that fourth quarter (2006) and the first quarter of ’07, roughly 30% of all of the titles that we have in inventory in house we have HD versions of that. That is more than enough than what we are allocated in server time.”

And while Starz has its HD distribution set, that isn’t the case among all video distributors. Stasi said studios need to be pressured to release VOD content in high-definition format.

“Part of that has to be pressuring the studios for earlier releases,” he said. As Blu-Ray DVD products hit the market “we have to, and we do push for earlier release dates for VOD. If DVD is going to be influencing VOD purchases, VOD should be in a position to compete on a level playing field. We’ve done all the right things in terms of encryption and copyright protection and all the rest, and all that remains now is the earlier release dates to put us in a very competitive environment. That’s what I’m hoping to see.”

With all of that in play, the big question now is how fast HD will grow within VOD. Comcast has already announced it will extend the HD On Demand content to 150 hours by the end of the year “and then we’ll see where it goes from there,” Thompson said. “But we do intend to continue to grow this, as well as the remainder of our standard-definition on-demand content.”

Going forward, the HD focus will be on movies, but Thompson noted it does have a good store of content from TV programming and music.

“We will probably do more with sports in the future — we probably will do more premium content from various programmers, but movies I think initially will be the core of our offerings,” Thompson said.

All in all, it looks like HD content is starting to arrive in the on-demand ecosystem. While its place may be small for the time being, it could nevertheless become important to cable’s on-demand strategies.

“From an on-demand standpoint, it’s a huge differentiator from the competition,” Hoagland said. “To be able to have that choice based on a consumer’s investment in their home entertainment is I think huge, because they are looking for good-quality product to play through that X-thousand-dollar investment that they have made, not only in their TV set but their surround-sound systems.”

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