Comcast Corp.'s cable unit plans to launch the world's most comprehensive package of on-demand content this fall in its hometown of Philadelphia. With a video-on-demand server with 1,500 hours of capacity — and headline-making deals with NBC for Today, NBC Nightly News, Dateline NBC and the local news — the MSO is among the industry's VOD leaders. In this Q&A session with Broadband Week editor Matt Stump, Comcast executive vice president of sales, marketing and customer service Dave Watson talks about where the MSO stands in getting the next phase of VOD off the ground. An edited transcript follows.
BW: Where are you on the timeline for company-wide VOD rollouts, and in your showcase market in Philadelphia?
Watson: Our focus has been primarily getting ready for the launch in Philadelphia. We've been providing ongoing rollout support to the existing 19 markets that we have. We have changed the model and the first introduction of this will be Philadelphia.
We have significantly boosted the amount of free content we expect to deploy.
In March, we talked about 100 or so hours of content. A combination of things has happened. The interest level has remained steady from the programmers' standpoint, as we further evolved the model in terms of what the categories were. Then, we found we can have between 500 and 600 hours of free content coupled with the hits movies and the library category. And we're still having discussions with premium folks on an SVOD slot.
BW: Are the original $9.95 and $14.95 price points — and the various categories, such as kids' programming — still holding?
Watson: Nothing has changed on that front. The key to us is to drive digital. That's the focus. So we have kept packages very simple at $9.95 and $14.95. What we've added is the notion of free content.
BW: The programmers seem to be looking at various combinations of free, free-and-paid and paid-only content. What are you seeing?
Watson: There has been just tremendous interest around this. That's fair, and part of the process of working through the business models.
We never went into it thinking that one size fits all. We're absolutely open to several ways of working through their issues.
We believe strongly that the free content component can be a win-win. It may not be the only vehicle that's available on-demand for the programmers. We think it's a very important point and [has] been validated by the great progress that has been made up to this point.
When I look back on an analogy, it was digital. The programmers had the vision to jump on board and develop programming and they benefited. Those that waited and held back a little bit, they wished they would have moved a little bit more aggressively.
It's the same thing here. From our standpoint, we're now talking about running out of server space. This is an evolution that will just continue and be driven by technology, consumer interest and all these things will come together. Whether it's a hard drive that ultimately ends up in the consumer's home delivered by someone, or if it's another business that we come together with the programmers, this is something that customers will absolutely love.
BW: Are there any new content deals you can talk about?
Watson: We're not talking about that at this point.
BW: If I'm a programmer, can I hold out any hope that I might get part of the $9.95- or $14.95-per-month fee if my content is included in that package?
Watson: A lot of programmers have existing content [through the diginets] on those packages. For some people, there is an immediate benefit that they have in terms of helping us drive digital further to our customer base. That's a real win there for them, and also to focus on the connect side and the disconnect side.
BW: How do you create a menu for 1,200 hours of content?
Watson: It's a great question. It's so important — the research that we've done validates [that] we have to break it down for them in categories that are understandable. We have to make it easy for them to access in multiple ways, not just one. We have to adapt the ability for them to find this based on their usage patterns, not just what we think.
That could come though the channel, the general guide, the menu screen. There are a handful of things we're working on right now.
BW: In many markets, HBO On Demand, for instance, is on a "channel" alongside a linear Home Box Office channel. Do you like that model?
Watson: We're still working through that. We've tested the concept and [consumers] do like the categories. It's simple for them to go to, for example, kids. They are right there and they pull up all the options available to them. That's simple and easy. Once they go into the category, they see program listings and it's absolutely connected to the network.
BW: With premium SVOD, you've tested the on-demand portion as part of the existing bundled price. Do you like that model going forward?
Watson: It makes a lot of sense to keep things very simple, to reduce the amount of transactions the customer has to think through.
The value of this is similar to when the premium folks did multiplexing. It's the same thing here. This will add value to the product. It will help us — and them — to retain premium customers. We think the best solution is to not charge incrementally for the on-demand component of their programming.
BW: Are you seeing decent lift in digital sell-in or cutting down churn?
Watson: The only thing I can say is that it is encouraging, and it validates our position that, if packaged appropriately, the customers will understand the value proposition.
BW: You've talked putting Philadelphia Flyers [hockey] and 76ers [basketball] home games on the server after each game has concluded, until the next home game. Is that a relatively sure bet?
Watson: That's exactly where we're going, and we're ironing out the final details.
BW: Are there other elements, such as post-game press conferences, that you're looking at?
Watson: Absolutely. It's not just the live content. There are many shows that Comcast SportsNet produces — coaches' shows, interview formats, panel discussions — that would be good, potential on-demand content.
BW: How about the local news channel you've got?
Watson: We think there are opportunities for CN8 [The Comcast Network] as well. They have wonderful content available for on-demand.
BW: Any other genres?
Watson: The one other one is best-of-cable, the things we're working on with people you would imagine. It's not easily put into a product category in terms of whether it's sports, news or entertainment. It's sort of a prime-time categorization, which is also very interesting.
BW: What about music videos?
Watson: We think music is a very good category.
BW: How are you approaching the ad-skipping question when it comes to free content?
Watson: We're not completely locked down on that yet. I'm not sure it's the best thing from a consumer perspective. We're working through the issues. I think if the advertising is engaging, and if it's promotional in nature, there are real unique opportunities to think outside the box.
You've got to think broadly. This is an interactive platform that opens up a whole new realm of possibilities.
They can use it for promotional purposes. They can use it for advertising purposes, all of which point — and it's my opinion at this point, because we're not officially done yet — it would be a mistake to tell the customer you can use the functionality up until the point that you see the ads.
BW: Do you see having some content where you can't skip through ads and other content where you can?
Watson: I think it will be all of one or all of the other, and it's something that we're still working through.
BW: Will you digest the Philadelphia results before you rollout in other markets?
Watson: There will be a lag that follows Philadelphia, so we can understand all the issues surrounding the technical demands on the network, operational things. It's a three- to six-month window that I would expect some form of a learning process, then enhance the other markets after that.