Bressler: Issues Remain for MSOs, Studios

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New Orleans -- Despite a landmark video-on-demand deal stuck earlier this
week between Paramount Pictures and In Demand L.L.C., several obstacles remain
before cable operators, programmers and studios can finally find common ground
when it comes to emerging digital services.

Among them: creating business models that benefit all of the players and
leveraging copy-protection measures that adequately secure the best content the
studios have to offer, according to Viacom Inc. senior executive vice president
and chief financial officer Richard Bressler, Thursday's keynote speaker at the
Cable & Telecommunications Association for Marketing's CTAM Digital
Conference here.

Although negotiations between operators, programmers and studios have become
rather testy as digital distribution enters the picture, working jointly on
solving those business issues should be a priority for all involved because
"interests in the digital world are more aligned than they are opposed,"
Bressler said.

Viacom-owned MTV Networks is already in discussion with cable operators about
possible VOD-distribution deals, but don't expect "free-on-demand" to enter the
lexicon, he added.

Bressler said he understood that FOD, from an operator's point of view, could
be wielded to boost digital adoption and reduce churn, but he believes the
concept is flawed because the programmer gets little to nothing in return while
potentially undervaluing the programming assets.

FOD, despite being "free" to the digital customer, still requires the
programmer to dole out money to market and package it, he added.

Bressler was also critical of operators that don't charge something extra for
subscription-VOD packages, citing internal research that indicated that
consumers would be willing to pay as much as $11 per month for the SVOD
component.

In a follow-up panel, Starz Encore Group LLC president of distribution Que
Spaulding agreed with the assessment that SVOD should not be offered as a simple
value-add, suggesting a strategy in which the price of the on-demand piece is
bundled in, rather than parted out.

Bressler also warned that peer-to-peer applications will harm the business
models of MSOs and content providers alike. "Our content is at risk: Your
business model is also at risk," he said.

By way of example, he noted that consumers would think twice about paying for
premium networks such as Home Box Office and Showtime if pristine copies of
popular originals such as The Sopranos and Queer as Folk were
allowed to roam the Internet unchecked.

Although downloading content via P2P applications remains "cumbersome" today,
it won't stay that way for long, Bressler said, calling attention to the
forthcoming rise of MPEG-4 (Moving Picture Expert Group), a video-compression
technology that offers more resolute images at lower bit rates than its MPEG-2
cousin.

MPEG-4 "is the MP3 of video," he said, referring to the digital-compression
format made famous by Napster Inc. and its file-swapping knockoffs.

Bressler also applied the microscope to digital-video-recording technology,
offering the latest in a string of warnings from programmers that DVR
ad-skipping and zapping capabilities could throw traditional models into chaos
and force programmers to recoup those costs in other ways, including higher
affiliate fees.

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