Basics Nets Chew 0n Free VOD

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With the launch of the next generation of video-on-demand packages, including free VOD, drawing near, basic networks are falling into three camps: those that willingly offer free content, those pushing hybrid packages of free and paid content and networks reluctant to provide any free content.

Operators and programmers profess a willingness to test various prices and packages. "We're trying to develop a flexible package of ideas and offerings," said Ben Pyne, senior vice president of affiliate sales and marketing for ABC Cable Networks Group.

"There's a certain humility around here about not knowing today what the final model will be," said Lindsay Gardner, executive vice president of affiliate sales and marketing for Fox Cable Networks.

But most networks, at some point in the process, are looking to generate revenue.

Not surprisingly, the more powerful networks — those with strong ratings, unique programming or widespread brand identities — are more reluctant to provide content for free.

"One of our concerns is that free-on-demand is not very sustainable in the long-term," said Albert Cheng, vice president, national accounts and distribution strategy for ABC Cable Networks Group. "Free on demand plays a role as a promotional tool," he continued.

But Cheng, like other programmers, cites the Internet experience, where content was given away for free. "We all know what happened. We don't want to get into a spot where there is no way to monetize that. We need to make sure we educate the value of what operators are providing."

ESPN vice president of alternative technologies and new media sales Matt Murphy said, "We've never supported the free-on-demand movement and we continue to hold fast in that proposition."

Other programmers are offering hybrid packages, with Discovery Channel and Comedy Central being the most visible.

"We want to be responsive to operator concerns about digital-churn reduction and customer loyalty," said Discovery Networks U.S. vice president of new media Clint Stinchcomb.

Discovery's Choice 10 VOD package includes 10 programs across various Discovery categories, plus the network's Sponsor Cinema advertising platform. "We embraced free-on-demand to bring advertising into that medium," Stinchcomb said.

Discovery On Demand will carry up to 100 hours of programming, and the network is discussing a $6- to $8-per-month subscription fee for that service.

A series like Blue Planet
might appear on Discovery on Demand, but the first episode could run on Choice 10, as a teaser to promote the DOD content, he said.

Comedy Central, which has provided programming at a la carte prices to Diva Systems for several years, is offering both paid and free content.

"We have a very distinct set of offerings for two different models," said Brad Samuels, executive vice president of affiliate relations at Comedy Central.

For example, sample segments of popular episodes of Primetime Glick
and South Park
are part of the free-on-demand offerings, Samuels said.

But other programs, including new Battlebots
episodes, cost 99-cents per episode or are sold as part of $1.95 or $2.95 bundles.

"With the pricing that we have for paid episodes, you can get a pretty good sense of usage and patterns watching the main channel," Samuels said.

NET SAMPLES

Free-on-demand may mean decreased digital churn for operators, but for programmers, it also means sampling that could lead to higher ratings for the linear channel, he said.

"In the same MSO, there will be some content that's paid and other content that is free," Samuels said.

Fox Cable Networks was instrumental in bringing The Shield
and 24
to Cablevision Systems Corp. as part of its VOD service. The episodes were available for free, though Fox received 1,000 cross-channel spots to help drive viewership and ratings.

"We're talking about different test models," Gardner said. "Long term, I expect we'll create various models and we expect some of those models there will be economics for the content providers."

Scripps Networks' three channels — Home & Garden Television, Food Network and Do It Yourself Network — offered content for 99 cents on Time Warner Cable's Cincinnati system, but its programming will be part of a free-on-demand tier in TWC's Green Bay, Wis., system.

"We're at the very beginning," said Scripps Howard Co. senior vice president of new ventures Channing Dawson. "We're in favor of early trials where you're testing free with the idea that it moves to a paid model."

"The hit rate on free is much higher than on VOD," he continued. "Sampling allows you to touch and taste things."

But, he added, "We're absolutely moving towards subscription."

(For the record, the most popular paid content in Cincinnati included a series on building log cabins and another on radio-controlled hobbies, such as flying model airplanes.)

BALANCING ACT

A&E Networks senior vice president of affiliate sales David Zagin said, "The subscription model is becoming more prevalent all the time, whether it's through a split or a guarantee. The revenue split will be the biggest part of this."

But Zagin also echoed other programmers when he said that VOD can help drive viewership. "We'll use the VOD platform as a promotional vehicle for programming on our core network," he said. VOD will provide A&E "the ability to constantly promote to your viewers."

Other networks are willing participants in free-on-demand trials. Outdoor Life Network is slated to supply Comcast Corp., which has an ownership stake in the channel, at least 70 hours of free-on-demand content, said Roger Williams, OLN's executive vice president and chief operating officer.

"We're interested in free-on-demand to understand consumer behavior and if there is an economic model," he said. Outdoor titles such as Outside Television
and Adventure Quest
will show up on the VOD platform. "This is a valued added benefit to digital cable."

C-SPAN also is putting together a package it expects to test with Comcast in Philadelphia later this year, according to the network's director of affiliate relations Peter Kiley. That package would include Booknotes
and In Depth, he said.

BRAND PROTECTION

With its news timeliness, C-SPAN has also considered live encoding of content for same-day VOD usage, Kiley said. The network would be able to make their coverage of events, such as the recent Enron Corp. hearings on Capitol Hill, accessible to viewers who were unable to see it live.

One of a programmer's big fears is losing its brand a sea of VOD programming. Comcast plans to group much of its content under broad categories, such as news, sports or kids. Time Warner Cable essentially is taking the virtual channel route, where each network has a channel portal that leads to its own on-demand content section.

"The issue we face on the VOD interface is the brand," said Scripps' Dawson. "The MSO wants to brand themselves and brand their on-demand service," he said. "The networks want to brand themselves on a relatively small screen."

In Cincinnati, Scripps had shows listed alphabetically, Dawson said. But many titles are meaningless unless they are attached to the network's name. "We have to have a place to brand our networks. If we're lumped together in one generic category then you'll lose the effect of the brands we spent so long building up. This will all work out, but the brands help bring new eyeballs to this on demand world."

Other programmers are open to discussing category options.

"However it is packaged, the Disney brand carries a lot of weight," ABC's Cheng said. "It works under either model. Our content is adequately branded and represented on whatever offering a cable operator has.

"Clearly, we are all experimenting how customers will actually interact. We have certain beliefs and predilections about how our content should be positioned."

While senior executives debate top-line strategy, the networks are moving ahead with putting together VOD content packages.

The Weather Channel is planning to put the local forecasts from the nation's 25 largest cities in its VOD package, according to vice president of business development Lisa Shankle. "We'll mostly have content that doesn't appear on our network," she said.

The one- to two-minute reports will be taped live by meteorologists and updated several times a day.

Also on tap: regional and national forecasts, boating, beach and skiing reports and some atmosphere programs.

ABC Cable is focusing on its Disney Channel and Toon Disney brands of kids and family programming for VOD, spanning series, original movies, animation and action kids programming.

"We're looking at VOD as a way to program to kids that's complementary to out linear channels," Cheng said. "One month, we may package a series showcase on Lizzie McGuire."

The company also is looking at the possibility of a SoapNet offering. "There are opportunities for SoapNet VOD," Cheng said, "as a way to superserve the soap fan with stunt programming."

SPORTS NEWS

ESPN is building its EXPN VOD service, designed to contain 30 to 40 hours of extreme sports programming at perhaps $3.95 per month, Murphy said. But Murphy is open to talking about combining EXPN with other content "to make one giant SVOD package. We want to work with the operator and see what works best with their models."

In addition to talking with operators on specific local VOD sports content, Murphy said ESPN will talk to the National Basketball Association this summer about on-demand content going forward under it's new TV rights deal.

Fox Cable is discussing national local sports, local news, movies, plus programming from National Geographic Channel, FX and Speedvision.

"There is sports content that doesn't make it to air," Gardner said, citing Fox's cameras at batting practice for the Los Angeles Dodgers or post-game press conference. "We're talking about taking local content and putting that on a server," he said. "Operators are trying to embrace as many things local as they can."

A&E's Zagin said foreign language and educational content has come up as a hot buttons among operators recently, as MSOs look to server niche audiences and provide meaningful content on digital tiers for audience sub-segments.

A&E has produced more than 1,000 Biography
episodes, and has the VOD rights to several hundred, Zagin said.

Original movies, History Alive
, Modern Marvels, Investigative Reports
and a handful of original movies will start making their way to VOD platforms, he said.

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