Comcast Inks Big VOD Deal

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Comcast Corp. made another big move on the video-on-demand front last week, inking a sizable deployment and purchase agreement with vendor Concurrent Computer Corp.

Under that "strategic volume purchase agreement," the MSO has ordered 79 MediaHawk servers for eight system-wide VOD deployments, Concurrent said. Financial terms of the deal were not disclosed, but Morgan Keegan & Co. estimated in a research note that the initial three-year deal could be worth between $6 million and $7 million, with the potential of another $9 to $10 million over the next 12 to 24 months.

Several of those eight sites will be switched on this summer, and Comcast likely will need to add more servers as digital penetration increases, said Concurrent vice president of business development Fred Allegrezza.

The deal with Comcast is meant to go beyond the initial eight sites, but Allegrezza would not be more specific.

Allegrezza said the deal is significant because those sites are moving slightly in parallel, which means that VOD is moving past sequential trials to wide-scale deployments. A VOD launch now typically takes about two months to execute — that's down from the six months Time Warner Cable spent rolling out its VOD system at Hawaii's Oceanic Cable in 1999.

Comcast is keeping the identity of its VOD systems secret for now, in order to keep consumer expectations in check. But the MSO said customers in those areas, depending on the property, use both Motorola Broadband Communications Sector DCT-2000 and Scientific-Atlanta Inc. digital boxes.

Those VOD launches "will be an important next step in our digital strategy to offer customers even more viewing choices than ever," Comcast cable president Steve Burke said in a press release.

Comcast plans to put VOD in front of 50,000 customers by the end of 2001, the MSO has said.

Allegrezza said Comcast has shown some interest in offering VOD applications beyond the typical movies-on-demand model. Those applications could include targeted, interactive video advertising, video-styled shopping, subscription video-on-demand and a network-based personal video recorder service.

A Comcast spokeswoman said the company is exploring all of those options, but its primary VOD focus continues to be centered on movies.

The deal with Concurrent is Comcast's second large VOD move of the year. Last month, it finished off a $10 million investment in SeaChange International Inc. that gave it an approximate 2-percent stake in the VOD vendor, a SeaChange spokesman said.

Comcast also has a warrant to snap up another 100,000 shares of SeaChange for $13.225 each.

The MSO also has a long-term master purchase agreement with SeaChange, though the number of servers involved in that deal were not disclosed. Comcast is working with SeaChange in one unnamed market, but more collaborative efforts are forthcoming, the SeaChange spokesman said.

Though Comcast's recent moves give VOD some much-needed momentum, "that doesn't mean the whole industry has taken off in a big way, but that some key players are there," said Morgan Keegan analyst Murray Arenson.

The Yankee Group media and entertainment group analyst Adi Kishore has become a bit more bullish on VOD, as digital cable becomes mainstream.

"Today's digital penetration is finally at a point when VOD rollouts actually mean something," he said. VOD has been criticized because it typically gets placed under the larger interactive- television umbrella, said Kishore.

"We're seeing that VOD has the clearest revenue model and adds the most value" among the various ITV applications," he said.

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