BOSTON -- Video-on-demand remains hard for users to navigate and frustratingly inflexible for advertisers, but VOD is positioned to drive the cable business in the years ahead, said executives on “The Future of VOD” panel breakfast here Tuesday.
If on-demand viewing is roughly 1% to 2% of all TV viewing time, that could represent $2 billion to $3.5 billion of value, said Jeff Boehme, senior vice president of business development for Nielsen, speaking on the panel presented by Multichannel News and B&C at CTAM Summit ’08.
“There are many networks that would die to get that kind of viewership,” he said.
Zuffa chairman and CEO Lorenzo Fertitta, whose company produces UFC mixed-martial arts events, said cable video-on-demand is more effective at driving viewers than any other digital platform. “The killer app for cable is VOD,” Fertitta said.
However, “what scares advertisers is the platform is still clunky,” said Diana Wechsler Kerekes, Comcast vice president of video content. “There are very long lead times -- it doesn’t work for a car dealer that has a promotion in two weeks.”
She noted that advertisers are excited about the ability to very finely target viewers on VOD, and that the industry is moving toward dynamic ad insertion technologies.
Boehme said navigating cable VOD services is still an “arduous” process. “Technologies will evolve to help people find VOD content,” he said. “If that happens I think you’ll see a big difference.”
Steve Necessary, Cox Communications vice president of product development, said the cable operator is developing next-generation interactive program guides to help users find VOD more easily. What’s also important, he said, is to constantly be marketing on-demand services to subscribers.
“We have to relentlessly drive awareness of the platform,” he said. “Consumers just aren’t using it as much as they could. We can’t underestimate the user education and awareness piece.”
Still, even given the current limitations of VOD, cable operators are finding on-demand content increasing in popularity. Comcast has served 9 billion views to date, and is averaging 300 million views per month.
“It’s not a fringe business. It is not an afterthought,” Wechsler Kerekes said, noting that Comcast offers movies on VOD in some cases before their theatrical release or on the same day as DVD release.
Wechsler Kerekes said of the 10,000 assets Comcast offers in a month, 97% are viewed at least once. “Even without any marketing, people are finding the guitar lessons in the VOD menu,” she said.
Necessary said VOD is a valuable tool based just on its ability to reduce churn. Cox, one of the later MSOs to completely roll out on-demand, has seen a 12% to 15% reduction in churn in markets after it’s gone live with VOD, according to Necessary.
For programmers, on-demand drives awareness of their existing linear programming, said Doug Sylvester, chief operating officer of TVN. “They’re not replacing the live event, they’re supplementing it with VOD to build a deeper relationship with the audience,” he said.
And linear can drive VOD viewing, Fertitta said. Spike TV airs UFC Unleashed 12 times per month. The same program is one of UFC’s biggest transactional items on VOD.
“We have an advantage because the consumer is used to thinking about us as a pay-per-view platform, so we don’t get the heartache when people come to buy a fight a la carte for $2.99 on VOD,” he said.
Lisa Schwartz, IFC Entertainment executive vice president distribution, operations and business development, said VOD is a leading distribution platform for her company. Many of IFC’s movies are available on-demand the same day in they’re premiered theatrically.
“There’s an even bigger incentive for folks to stay at home” in tough economic times, she said. “People in the film industry are looking at this platform and saying, it’s really viable to get people aware and watching.”
Schwartz said she hoped VOD platforms evolve to provide enhanced retail opportunities, such as loyalty programs for customers.
Ultimately, in relation to linear TV, VOD services will evolve to look more like a network DVR, said Cox’s Necessary -- “as a way to let consumers get access to all high-value content that was recently aired” -- but with a priority on preserving the advertising model.
VOD, though, won’t entirely replace linear TV viewing, Boehme said, nor will the Internet steal away all viewers from TV.
“The Internet has 175 million different Web sites. Will people gravitate to the Internet? Not necessarily -- because there’s the experience of watching an event or a movie in front of a 70-inch HDTV,” Boehme said.
The panel was moderated by Multichannel News editor in chief Mark Robichaux and programming editor Tom Umstead.
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