News

Learning Lessons From Netflix

6/25/2012 12:01 AM Eastern

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-permonth,
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 Netfix.

“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 off er 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.

March