Looking for VOD's Guardian Angel

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A number of important, behind-the-scenes initiatives are underway in the video-on-demand space in first quarter 2004 that will go a long way to determining just how important VOD will be for MSOs going forward.

It was just under two years ago that VOD was cable's fair maiden, slayer of the DBS beast, successor to more channels as a reason to subscribe to digital. Cable finally had its digital churn buster.

VOD was launched nearly everywhere. Subscription VOD took off like a rocket. Requisite hit movies from Hollywood were available.

And MSOs said "why not" to basic-channel, advertising-supported content. Get it launched, and we'll figure out the economics later.

ADS' TIME IS NOW

Well, for the advertiser-supported content crowd, the time to "figure out the economics" is now.

To that end, the American Association of Advertising Agencies, as detailed in this section, will be presented a first set of guidelines for advertising in the VOD space, guidelines that could eventually be used in the DVR and broadband content space as well.

At the same time, Comcast has scheduled a first-quarter VOD measurement test with a number of programmers and Rentrak Corp., or so we hear.

These are two important steps. The cable industry, probably within the next 12 months, has to come up with a plausible measurement system for VOD or risk marginalizing a potential business that will get surpassed by digital video recorders, HDTV and perhaps even interactive TV.

All the sex and glitter these days surrounds DVRs and HDTV. The Super Bowl in HDTV and the holiday sales season. Add to that the steady trickle of good news coming from MSOs on DVR penetration.

Add to that the full impact of Rupert Murdoch's marketing plans for DirecTV, not to mention direct-broadcast-satellite upstart Voom's HDTV noise in the marketplace. And remember the three largest telcos will start selling DBS in the next several months.

Then there's cable's high-speed Internet platform, under attack from cut rate pricing by digital-subscriber-line providers that are also upping the ante on the content side.

It's a lot for MSOs to keep track of and it's easy to see why VOD can get lost in the mix, if it hasn't already.

But the stakes are still important. Only a smattering of the top TV and cable programming from ad supported networks is on VOD.

Technology exists for companies to encode Friends and store it on servers immediately. Mystro found out, among other things, that copyright owners weren't quite ready to make that step. Security was one issue. But clearly, lack of a business model was another.

It's going on two years now that John Hendricks told a National Show crowd that Discovery would be OK with VOD if it knew the "lost" ratings from linear TV could be accounted for on the VOD side.

That requires measurement tools that all parties — cable operators, programmers, agencies, advertisers and media buyers — can agree upon. After that, the money will flow.

But that requires MSOs to welcome third-party auditors to look at and verify their VOD traffic and turn around that information in a very, very timely fashion.

It requires MSOs to work with Madison Avenue from a standpoint that "I have a better idea and better way for you to reach your audience," rather than a "I'm still resentful you don't give us our fair share of ad dollars so I'll force you into buying VOD [without measurement in place] in order to get a cable linear buy."

And it requires senior MSO executives, and industry executives in general, to listen to Debbie Mullins (at Cox), Andy Addis (at Comcast) and others of that ilk. Those are the people that are going to figure out this VOD measurement issue.

DVR FEAR AN ISSUE

The timing is also critical because programmers are growing more weary, and fearful, of what the DVR will to do their economics. It is in their best interest to figure out a measurement system for VOD so money can start changing hands.

A world of 60% DVR penetration and 20% VOD usage does programmers no good, unless ad spot measurement tools can work in both spaces.

Advertising has never been a core competency in the executive suites of the MSOs. But with top executives such as Cox Communications Inc. EVP of operations Pat Esser and Comcast Cable president Steve Burke around, there is at least a greater understanding of the link between cable's products and Madison Avenue, far beyond the traditional linear 30-second spot.

It's cable's home run to hit if it wants to step up to the plate.

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