Execs Say VOD Trumps PPV Buy Rates

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Baltimore-Early video-on-demand trials and market launches have indicated that consumers will buy more films when they have access to instant start times than they would on a standard pay-per-view basis.

That was the consensus of VOD panelists at the East Coast Cable 2000 show here earlier this month.

Insight Communications Co. has averaged VOD buy-rates of about 200 percent a month (two VOD orders per home) among digital-cable customers in its first few Midwestern markets. By contrast, Insight customers with access to only two analog PPV channels average a 20 percent buy-rate each month.

"People absolutely love it," said senior vice president of marketing and programming Pam Euler Halling.

Of Insight's total VOD buys, about 55 to 60 percent are new releases, another 25 percent are adult movies, 15 percent are library titles and less than 10 percent consist of children's or how-to content.

Over the long run, the MSO is targeting a buy-rate closer to 250 percent to 300 percent to make the business viable, Euler Halling said.

In launching VOD to consumers, Insight found it "had to absolutely separate this from pay-per-view," Euler Halling said. "It's not 'pay-per-view plus. 'It's a completely new product."

Panel moderator Jeff Calman, senior vice president of video-on-demand and pay-per-view for Warner Bros., agreed.

"It's definitely a new product, and you have to give it all the attention that's needed," he said.

MSOs must be careful to adequately explain the new technology to their customers, Calman added. "This is a product where initial response is very important."

Of the new interactive-television technologies that cable companies plan to introduce, VOD is one of the least threatening to consumers, AT & T Broadband vice president of new product launch operations Clarence Caldwell said. Anyone who can work a VCR knows how to use VOD, he added.

Caldwell said an investment in VOD could be repaid with 200 percent buy-rates, although the company is projecting ultimate rates of more than 500 percent. And as technology costs decline, the break-even will no longer require a 200 percent buy-rate.

AT & T plans to deploy VOD later this year in Atlanta.

Comcast Cable Communications senior vice president of programming Tom Hurley said consumers are already somewhat conditioned to VOD if they've visited a hotel and ordered a movie from its on-screen menu. True VOD offers benefits, he added, because today's in-room hotel movies do not offer VCR-like control.

Personal-video recorders such as those from TiVo Inc. condition consumers to expect features such as pause and rewind, Hurley added.

Comcast has started VOD technical trials and expects its first consumer deployments over the next few months.

Euler Halling said she'd like to see VOD services develop more local content, such as high-school sports-unique fare that competitors like direct-broadcast satellite could not match.

Panelists debated whether the larger bills generated by multiple VOD buys each month would cause sticker shock in their customers. Some recommended encouraging subscribers to sign up for credit-card payment, but others said they'd be more likely to experience sticker shock when confronted by an ever-growing bill.

Video stores may still hold an advantage over VOD because customers tend to pay for the rentals immediately with out-of-pocket cash, and don't need to be confronted with the cost weeks or months after the fact.

Subscription video-on-demand can help provide MSOs with incremental revenues each month from their VOD technology, Starz Encore senior vice president of SVOD Greg Perez said.

SVOD may replace the library category on VOD, he added, because the movies available on premium channels are still within the first few years of their lives, rather than the 15-year-old movies typically found among library titles.

The MSO executives on the panel said they were waiting to get a better handle on consumer response to VOD before deploying SVOD.

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