No Easy Answers to VOD Conundrum

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Philadelphia -- Although video-on-demand deployments and libraries continue to expand, the burgeoning service still lacks a definitive business model.

That was the consensus here Tuesday among panelists during a Multichannel News/Broadcasting & Cable-hosted panel discussion and breakfast at the CTAM Summit.

For Time Warner Cable, growth is expected from all three VOD categories -- “free” on-demand fare, subscription VOD and more traditional “transactional” VOD -- senior vice president Bob Benya said. No one category will serve as the “killer model,” he added, noting that VOD continues to play an important role in the value of digital cable.

While the business models behind transactional and SVOD are fairly straightforward, much more contention exists between operators and programmers in the free category.

Programmers pay big bucks for content, so the economic foundation of that content and the VOD business must be supported, explained Ron Lamprecht, VP of new media at NBC Universal.

Although 20th Century Fox Film Corp. owes its growth in the VOD arena to MSOs such as Comcast Corp., a free-on-demand pioneer, the content supplier initially was leery about the model, senior VP of worldwide pay-per-view Jamie McCabe said.

But that position has changed, he added, as it became clear over time that free content helped customers to become more comfortable with the on-demand environment and transitioned them to “pay” titles.

Benya maintained that “it doesn’t make a lot of sense” for an operator to pay for the same content more than once. The MSO, however, is more “open-minded” on that subject if the content in question happens to be new and unique.

Still, there are models emerging that will help to pay the freight on free-VOD titles.

“Advertising is important to what VOD has to offer,” said Scott Ferris, senior VP and general manager of Atlas On Demand, a company that is bringing its experience in Internet advertising to the VOD world.

He said ad agencies are attracted to the advertising aspects of VOD because it offers a more measurable platform than its linear counterpart.

There are already some early successes in this area. Comcast Spotlight, for example, recently teamed up with ESPN to promote the X Games using the VOD platform. There, Comcast and ESPN assembled three distinct advertising packages, offered them locally and gave the sports programmer some valuable exposure, said Warren Schlichting, VP of new-business strategy at Comcast Spotlight.

In terms of bringing business models together among operators and programmers, Time Warner is also excited about the possibilities of “start-over,” an application in the works that enables viewers to restart programs but does not allow them to skip ads. Customers ranked it first among 30 features brought up in a survey.

“We think it’s an interesting place to start,” Benya said, adding that long-form VOD ads have strong potential.

Programmers, meanwhile, are growing more interested in VOD as the costs of encoding content, transporting it and storing it continue to drop, but they are not yet ready to put all of their resources into it.

“We think there is a business there,” McCabe said. “A big business? I’m not sure.”

Jeff Baumgartner is editor of CED Magazine.

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