Veering from what many industry executives anticipated would be an incremental, fee-based model, Adelphia Communications Corp. will offer subscription video-on-demand services in two markets on a premium basis.
The MSO’s decision to offer SVOD services from Home Box Office, Starz Encore Group LLC and Showtime Networks Inc. as part of the programmers’ respective premium packages — without an additional fee — has some premium-channel executives concerned that a precedent may be set.
Adelphia vice president of finance Jim Brown said the MSO would roll out VOD service during June in Cleveland and western Pennsylvania. He said the company has inked SVOD arrangements with HBO, Starz and Showtime.
Adelphia is the first MSO to officially announce plans for SVOD services that would allow operators to offer movies that debut within their premium windows on a VOD basis.
Many industry executives had eyed a SVOD revenue model in which subscribers would pay an extra $3 to $6 per month to access movies, complete with fast forward, stop and rewind capabilities.
But in an effort to stem subscriber churn, Adelphia will offer SVOD as a part of its overall premium packages, rather than charging separately for the technology.
“We’re pretty good at selling HBO, but we’re poor at retaining those customers,” Brown said during an investors’ conference last week. “This [SVOD] will help in the retention of these subscribers.”
Executives at the premium networks were careful not to criticize Adelphia’s approach, saying that several models must be explored before the right course of action for the new technology can be determined. But the networks have planned to charge some type of subscription fee, if for no other reason than to cover technological costs associated with setting up and maintaining the service.
“We don’t see SVOD as just another plex channel. It has inventory and value, but we won’t know how much value it has for the consumer until we roll it out and see,” said Showtime executive vice president of sales and affiliate marketing Jeff Wade.
“[Adelphia] is planning to use it as added value, although we don’t necessarily agree that added-value is the way to go. No one knows what the right model is,” he added.
Despite Adelphia’s bundling plans, Starz vice president of subscription VOD Greg DePrez said his company plans to explore other SVOD pricing and distribution models with Adelphia.
“We applaud Adelphia for taking the vital first step of linking both SVOD and VOD together,” DePrez said. “We are going to explore other ways to take advantage of the opportunities SVOD provides.”
If operators decide it’s more feasible to fold SVOD into the current premium package, network executives said, operators will most likely still pay a set fee per subscriber — somewhere in the neighborhood of $1 to $2.
“We will receive some revenue for the service that we’re providing,” said one executive. “It will be up to the operator to determine whether they pass that fee onto the subscribers or offer SVOD as a loss-leader.”