Master of the VOD Universe

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Comcast Corp. chief operating officer Steve Burke has led the charge of the MSO’s video-on-demand rollout over the past year, and he has had great success. VOD is expected to be available in about 80% of Comcast homes by the end of the year and so far, the results are startling: Customers average 23 VOD sessions per month, and in October customers accessed about 58 million VOD streams, according to the MSO. Burke recently sat down with Linda Moss, Multichannel News editor-at-large, and Mike Farrell, senior finance editor, to talk about Comcast’s VOD strategy. An edited transcript follows:

MCN: Comcast senior vice president of marketing and new products Andy Addis has said that you’re trying to get the industry behind VOD, so you can get a 20 million to 30 million subscriber base to take to Madison Avenue. What are you trying to do to get the rest of the industry on board?

Burke: I think we’ve been pretty vocal about how important we believe on-demand programming is. And we’ve been vocal with the content community — we try to stress the fact that there are very serious copyright issues that could pose very serious threats to any company that owns content — and the digital cable network has never been compromised, has extremely strong copy protection.

If you start from the assumption that people are going to time-shift, I think, as a content company, you should prefer people to time-shift on VOD infrastructure [vs.] on DVD [or] on the Internet.

We spend a lot of time showing [other MSOs] our results, [taking] people through our thought process.

My sense is you’re seeing most MSOs move toward more VOD content. But every cable company is in a different spot. Some have said, 'We want to get into the telephone business as quickly as possible.’ That’s a very intense thing to do.

One of the great things about this business is that there are a bunch of different strategic decisions you can make at different times, and none of them are right, and none of them are wrong. It’s all taking advantage of opportunities when you think they are ripe. I do get the sense that most of the major MSOs are trying to increase the amount of free video on demand they have, and we’re going to continue to try to be evangelistic, because we think it’s so important.

MCN: What progress are you making with programmers, in terms of this idea of them providing content for free VOD?

Burke: I think we’ve made tremendous progress. If you look at the number of hours, we’re now getting literally thousands of hours of free programming. We don’t charge customers, but the programming we’re getting from cable content providers is, by and large, repurposed from their linear channels.

If you look at our relationship with A&E [Television Networks] or Discovery [Networks U.S.], we’re happily paying those companies literally hundreds of millions of dollars for programming, and as part of that, we think repurposing some of that programming we are paying for makes sense for us and for them.

I think the programmers who embraced VOD quickly and early are now pleased that they’ve got that shelf space. There are still some programmers that are moving more quickly that others, but I think there’s an almost natural gravitational pull toward providing more programming.

MCN: At one point, you said you’d be willing to pay for new content. Is that happening?

Burke: Yes, in some instances. I think it’s logical and rational to say programming that we’re already paying for [we should repurpose] in a time-shifted way at no additional cost.

I think it’s illogical and irrational to ask a programmer to go out and create brand-new product, which has a cost, and for us not to pay for it. Furthermore, it’s illogical for us to say we want to get programming that we currently don’t pay for from someone we don’t have a relationship with.

Examples of programming we are paying for are [Metro-Goldwyn-Mayer Inc.] and Sony [Pictures] movies. We’re going to have 400 movies a year, and we’re paying for those movies. We’re not going to charge consumers for it. But those movies are not part of a linear channel, and therefore we need to pay for those movies.

We have a product that is extremely popular in Philadelphia called Dating On Demand, and we’re paying for that. We have a lot of niche programming — [like] fitness, cars — and we’re paying for that.

For really compelling product, we’d be happy to pay. That said, we do not intend to charge consumers for it, so there’s only a certain amount that we’re able to pay. Otherwise the economic model just breaks down.

MCN: What’s most popular now on VOD?

Burke: The most popular programming right now is HBO [Home Box Office]. It has been for a long time and, interestingly, within the HBO programming the most popular [content] is the series, not the movies. Anything for kids and anything for teens were extremely strong right off the bat.

MCN: To what extent is having local content important to your VOD strategy?

Burke: I think it’s very important. The cable industry has always been a believer in local content, but there have been times when it’s hard to find the right business model because traditionally it’s been hard to afford the production values to make the whole thing work. This is perfect, because we’re not taking a channel.

If you look at the ability to do local real estate, local employment ads, local sports, you have to start from the premise that the cost of server capacity is coming down so rapidly that on a marginal basis it’s really a trivial cost. Therefore, putting an extra 100 hours, or even 1,000 hours, of local content really doesn’t cost you much.

When you have a big cluster of customers, as we do in places like Philadelphia, Boston and Chicago, you can put up a lot of very interesting local content. You’ll see that will be a big part of our push.

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