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Showtime Enters Second SVOD Phase

7/04/2004 8:00 PM Eastern

Now that subscription video-on-demand is firmly implanted in most MSOs' VOD rollouts, increased attention is being paid to the marketing of the service. Showtime Networks Inc. executives say their key priorities over the next year are to move from overall awareness to trial usage and differentiate between the benefits of SVOD and digital video recorders.

“The world of marketing SVOD is starting to look different than linear,” said Showtime senior vice president of marketing Geof Rochester, because of the nature of product. The consumer's ability to access content at any time, and the use of SVOD as a premium sell-in and retention tool, contribute to new ways of thinking about premium networks as SVOD evolves, he said.

Showtime has “over 2.5 million subscribers and are growing,” he said, adding that The Movie Channel On Demand is now at 1 million homes.

The good news is that consumers like SVOD. “It drives customer satisfaction,” Rochester said. “After they have subscribed, the overall perception of Showtime service has gone up. And clearly all the operators say SVOD services are driving penetration. These technologies reduce churn, and that's super critical to Wall Street.”

Premium networks especially benefit from SVOD because the technology encourages sampling and viewership. Rochester said Showtime's SVOD marketing emphasis is moving into phase two.

“It's less about awareness, and more about trial,” he said. Awareness has doubled from 30% last year among Showtime subscribers to as high as 60% this year.

According to Rochester, in the early days, some consumers worried they would be charged every time that accessed SVOD content. Constant education has been key to overcoming that perception.

COMPATIBLE OPTIONS

“The second part is answering the question: With SVOD and DVR in the same market, does that cannibalize the services?” he said. “We're finding that together they two complement each other. Consumers using both watch more of everything.”

Part and parcel of these initiatives is providing Showtime and operator sales forces and customer service representatives with new marketing materials on the trial issue and DVR vs. SVOD question.

Showtime conducted a joint SVOD-DVR marketing campaign with Time Warner Cable's San Antonio system. “We positioned DVR for all your TV viewing and SVOD for Showtime,” said Showtime director of new products marketing Alicia Scotti. “Use DVR for broadcast and have the comfort of SVOD being always there for you.”

The campaign boosted combined Showtime and Movie Channel penetration by nearly 30%, and increased use of on-demand packages from both networks 157%.

The campaign also lifted Time Warner's DVR penetration by 50%. And the premium network said that its digital sell-in during that period jumped from 40% to 70%.

Later this year and into early 2005, Comcast Corp., Cox Communications Inc. and Adelphia Communications Corp. will launch the Showtime offering. So at any point in time, systems are either just starting, or are into more mature phases of marketing.

NEW WAY TO TALK

As SVOD becomes more widely adopted, it starts to alter equations for other aspects of the service, Rochester said. “This could be a different way to talk to consumers,” he said. “Maybe every time you talk about programming, you talk about catching it on SVOD.”

Already, Showtime's new premieres show up the next day on SVOD. But SVOD could also help the premium network build audiences for new series. Rochester points to the new series, Huff, debuting this fall. “That will be a great product,” he said. “Consumers will be able to trial and sample the product. Original series are tailor-made for SVOD product.”

Showtime is seeing anecdotal evidence that SVOD can reduce churn and increase premium penetration. Last fall, an integrated targeted marketing campaign that featured a live appearance by Soul Food star Malinda Williams in Time Warner Cable's Raleigh, N.C., system during the Bull Durham Jazz Festival saw Showtime On Demand subscriptions jump 45%.

Overall, Rochester is pleased with how operators have marketed premium SVOD. “The operators have been very smart,” he said, adding that they've learned from early trials not to communicate too much at one time with consumers.

The SVOD business model continues to evolve for both sides. Most SVOD services don't carry an extra charge, with the feature marketed inside digital packages. But there is room to raise rates over time for those digital packages, with premium suppliers seeing some of that revenue, as well as revenue increases from more subscriptions and reduction in churn. “We both want to grow revenue streams,” Rochester said. “As [the operator's] business model is enhanced, we reap some benefit from that.”

Rochester said that multiplexing and VOD have both helped redefine the premium category. But he believes the combination of VOD, SVOD and DVR will have a greater lasting impact, “It's really a sea change in behavior.”

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