Basic Networks Rally Around VOD

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Next week — if you're a digital, video-on-demand-enabled, Time Warner Cable subscriber in Cincinnati — you'll be able to review Thanksgiving turkey recipes, plan your winter garden or learn how to decorate your house for that Christmas party, all through your remote control.

On. Nov. 15, 60 hours of content from Scripps Networks programmers Food Network, Home & Garden Television and Do It Yourself will appear on Time Warner's VOD system. It's the first venture by Scripps into VOD, but it's only the latest example illustrating how basic cable networks are experimenting with the technology.

Years ago, cable operators believed hit movies would drive VOD deployments, but when talks with Hollywood slowed, operators began listening to premium networks pitching subscription VOD plans for headend video servers.

As the popularity of SVOD grew among the premium programmers Starz Encore Group LLC, Home Box Office and Showtime Networks Inc. — and early tests proved successful — basic programmers started looking at what they could offer to VOD suppliers.

"We're at a time where we have to get distribution quickly," said Scripps Networks New Ventures senior vice president Channing Dawson. "There's a reason to get out as fast as we possibly can."

Scripps's VOD strategy centers around seasonal programming tied to a cable system's particular geographic region. In Cincinnati, Scripps will offer 20 hours apiece of on-demand programming from Food Network, HGTV and DIY. All programming will be in 30- or 60-minute segments, Dawson said, and probably priced in the 99 cents to $1.99 range.

"The nuance of VOD is that there will be a seasonal overlay that may entice viewers to engage in on-demand programming," Dawson said. "We have to slice it every single way we can."

The holiday programs will range from Christmas decorating shows to Thanksgiving and holiday menus. Scripps plans to break up the food shows into categories, such as appetizers or desserts.

In January, Scripps plans to replace the 60 hours of holiday programs with a winter category which could include soup recipes, spring gardening ideas and major kitchen redesigns, since many people plan remodeling projects during the winter, Dawson said. Dawson plans to rotate blocks of programming every two months.

An eight-week spring block of VOD programming would likely showcase spring gardening and housecleaning tips and instructions on the preparation of light foods, like salads, he said.

Short-form programming also may appear in 2002. "We think we'll eventually have the complete fix-it" category, Dawson said. DIY has video content for 400 household projects that could find its way to a video server — everything from fixing leaky faucets to building a tree house.

"We'd like to do what we call a Home Encyclopedia," Dawson said.

BRANDING VOD

Stocking servers with shorter three- to five-minute videos will take time, Dawson said, because of storage, streaming, bandwidth and billing issues.

"It's going to be a system-by-system rollout, where everyone is learning something," he said.

One issue Scripps will face in a VOD world is branding, Dawson said. "It's very hard in a limited-bandwidth environment to brand as effectively as we do on TV," he said. "On TV, we brand networks more than the shows.

"If you take the limited interfaces in the VOD environment, scrolling through titles … that uses up a substantial amount of the interface," Dawson added. It may be hard for consumers to understand what individual titles mean on a VOD menu, if there isn't more text information, Dawson said.

A second problem is whether consumers would wade through a list of 40 titles to find the video on repairing a leaky faucet.

One answer may be to offer SVOD packages from HGTV, Food or DIY — a business model that may work better for Scripps, according to Dawson.

"SVOD will be an easier business to get success, but harder to market," Dawson said.

And marketing efforts would likely have to be local. Months before an SVOD launch, Scripps and the participating operator would have to identify who would most likely be interested in an HGTV SVOD package, for instance, using online marketing and email newsletters.

"It becomes a very interesting problem," said Dawson. "We would have to be co-promoting this service."

For example, HGTV could package 20 hours a month of Crafts and Collectibles
— the popular craft show hosted by Carol Duvall — in an SVOD format.

Dawson also understands that some operators may not want to give up server space to Scripps shows that appeal to niche audiences. But Scripps is looking at a tiered storage system, in which some content may be housed in a central location, Dawson said.

Scripps has already collected hundreds of hours of video clips in a national repository, for use on its Web sites. Food Network has 65 short-form video clips, titled "Food Bites," shot specially for the Web. And HGTV has over 500 video clips on the Web, Dawson said, while DIY has information on 3,000 household projects online.

Encoding standards for the Web are different than those for VOD, Dawson said, which increases the complexity and cost for programmers.

"Video is the enhancement of the text and graphics" on the Web, Dawson said.

ESPN REVS IT UP

Although ESPN has delivered VOD content to Diva Systems Corp. for more than two years, it's recently kicked its activities up a notch, as operators roll out VOD en masse.

"We have a huge library of assets that we've compiled over the last 21 years," said ESPN vice president of alternative technologies and new media sales Matt Murphy.

ESPN is systematically going through its library to determine which content makes sense for VOD and how it can obtain the rights to show it. By year's end, it should have 100 programs available for VOD, Murphy said.

Currently ESPN offers 20 episodes of SportsCentury, classic boxing matches like the "Thrilla in Manila" and the "Rumble in the Jungle," college football bowl games, X Games events and instructional shows from its Bass Anglers Sportsmen's Society fishing library on Diva servers installed in Insight Communications Co. and Charter Communications Inc. systems.

The instructional shows, boxing, sports bloopers and extreme-sports fare are doing well, Murphy said.

ESPN is learning that both operators and subscribers are quite interested in local content.

"We can put at a particular headend SportsCentury
content that's germane to that area," said Murphy, such as Dallas Cowboys-related SportsCentury
episodes and Cotton Bowl games in Texas.

"Cable systems like the idea because they can brand themselves locally," he said.

The instructional programming, which offers advice on how to chip a golf ball or cast a fishing line, could work well in SVOD, Murphy said.

"Maybe you subscribe to a particular sports instructional category for three months or six months," he said.

Although ESPN carries video clips on its Web site, Murphy doesn't see much crossover between the products at present, for several reasons.

First is the issue of sports rights, he said. Secondly, most of the Web-site clips are news highlights that are one to three minutes in length.

"I personally think the [short-form] broadband product will be different than the TV product," he said.

Over the next 12 months, Murphy hopes to add National Association for Stock Car Racing content, once rights issues are resolved. NASCAR will fit well into ESPN's local VOD strategy.

Murphy also plans to add college basketball and football games, as well as more SportsCentury
shows.

More X Games content is likely, given that the extreme-sports event appeals to a demographic that is an early adopter of new technology, Murphy said. "We think they will enjoy coming to the ESPN VOD environment very much."

MORE FROM COMEDY

Comedy Central plans to add more South Park
episodes, about 10 Battlebots
programs and installments from another high-profile series to its VOD lineup next year, according to network executive vice president of affiliate relations Brad Samuels.

"We're eager to see what we can do," he said.

Over the past year, 20 South Park
episodes from the first two seasons, along with a dozen comedy specials and 20 Dr. Katz: Professional Therapist
episodes have been available to In Demand's VOD affiliates.

"South Park
is doing really well," Samuels said, based on its strong demographic appeal and tie-ins with new episodes on Comedy Central. "The loyalty of the show gets viewers to watch it again."

The VOD South Park
episodes are from the series' first two seasons, Samuels said. The program is now in its fifth year on the network.

"We have to protect the franchise while supporting the new VOD category," Samuels said of the network's decision to air older shows on VOD.

Samuels said Comedy Central would add "maybe 10" Battlebots
episodes in January plus another "high-profile series," once talent and producer negotiations are complete.

The network plans to test the waters with Spanish language versions of South Park
episodes in three to four markets. "We'll see if we can generate usage among that segment."

Samuels said Comedy, like other basic networks, is trying to determine how much VOD can contribute to its bottom line. Fiscally, Samuels says his goal is generate a slight profit from VOD in 2002.

Strategically, he said, his priorities are "partnering with affiliates to satisfy their VOD needs, help cross-promote back to the main channel" and strive to reach break-even.

For instance, operators could promote VOD Battlebots
episodes in the week leading up to a new Battlebots
episode on the channel, Samuels said. "We need to look for ways to cross-promote."

Long-term, Samuels also said there may be value in basic SVOD packages.

"I think, over time, that's going to be the most productive way to use our VOD content. I think that's the way customers will want to buy VOD," he said. "We need to be realistic [in] what we can generate on an incremental basis."

American Movie Classics and WE: Women's Entertainment are dabbling with VOD on the Sony set-top box in Cablevision Systems Corp.'s New York system. Digital subscribers can access free virtual channels for both networks, which include additional footage from AMC's Backstory
franchise or WE's Everyday Elegance, said Tom Barreca, senior vice president of new media at AMC.

AMC licenses most of its movies, although it owns a small film library for which it has some VOD rights, according to Barreca.

"The studios have been fairly coy with us," he said, as both sides try to figure out what the potential for library product on VOD.

"Our sweet spot is the movie-packaging business," Barreca said. The studios may want to sell library product directly to MSOs, but what operator would want to package six different sets of library films from six different studios? That's a role AMC or Turner Classic Movies could play.

Another issue is how MSOs would sell library titles, said Barreca. Hit movies have a residential awareness factor, which makes it easier to sell them for VOD just by title. "You can't do that with older films," Barreca said.

"We think library titles could be a fairly healthy business, because the splits could be better," Barreca said — even if VOD library movies sell for $1 to $2.50. Once there are enough VOD homes, prices could drop to $1, making it more efficient to offer a library SVOD service, Barreca said.

Going forward, Scripps' Dawson sees a number of key issues that need to be resolved.

"We'll learn about interactivity through VOD," but VOD will serve as the first area of dispute over walled-garden content, because every player will want first-screen access.

Then there is the issue of vying for server space.

"We can't put free previews in our offering, because it uses up streams and storage capacity," Dawson said. "Then it's a performance issue. Who's going to compete with Sex in the City
?

"We'll have to program this as a network. This is a fifth network, in some regards."

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