Five months into its launch of "Phillyvision," — 1,100-hours of video-on-demand programming dominated by free content — Comcast Corp. is pleased enough with the model to introduce it in all of its systems within the near future.
At Comcast's May 16 all-day meeting with investors, executives made clear that Phillyvision was also just the first phase in the evolution of Comcast's VOD platform, with greater choice to come. President and CEO Brian Roberts spoke of the high degree of personalization that future VOD systems will afford.
"VOD is the beginning of the personalization of television," he said, likening it to the "My Yahoo!" functions of Internet portal Yahoo!
"You could take [an ESPN] SportsCenter-like show and make each segment available in real time," he said. "The personalization of TV is something satellite can't do."
What viewers want
Getting closer to a consumer's true interests is part of what Phillyvision is all about. Comcast believes that the allure of VOD — an interactive service that can't be matched by direct-broadcast satellite — can both retain digital subscribers and even add basic households.
"Digital just gives us parity with satellite," said executive vice president of sales and customer service Dave Watson. "VOD is going to help us win the dish customer."
Early VOD results are encouraging, added vice president of marketing Andy Addis. Monthly order rates for both free and transactional content stand at 467% in Philadelphia. That's nearly five orders per home per month, he said.
And the free on-demand (FOD) content has boosted pay-movie buy-rates. In Comcast markets where FOD isn't offered, movies have a 71% buy-rate, he said, while Philadelphia's buy-rate is 90%.
Perhaps more important is early anecdotal evidence that FOD can help reduce digital churn. Comcast tracked 5,795 new digital subscribers from December 2002 through April 2003, Addis said.
Some 53% of those consumers used the on-demand service during that period. Of those that used the service, 96% are still digital subscribers. Among those that didn't use the service, only 82% are still digital customers.
"This is very significant," Addis said. "It's all about driving usage, which drives value and customer retention."
About 33% of the subscribers are watching at least five programs a month, said Addis. "The challenge is to drive that higher so all the subscribers are using it," he said.
The Philadelphia version of FOD has been transplanted to Northern New Jersey and Boston.
Comcast plans to introduce the service to Baltimore-Washington, D.C.; Charleston, S.C.; Detroit; Albuquerque, N.M.; Indianapolis; Atlanta; Pittsburgh; and Richmond, Va., later this year.
Partial launches in San Francisco and Chicago are also expected.
"We're seeking out unique and compelling content," Addis said. "It's a never-ending quest."
More product from basic-cable networks will come online within the next 60 days, Addis hinted.
Both Addis and Roberts said another subscription VOD programmer aside from Showtime could also join the lineup.
"We're very close with HBO [Home Box Office], we hope," Roberts said.
With respect to the most popular content, Addis said, "news is a great category." Comcast carries national news programs from NBC and Cable News Network, as well as local-news content from NBC owned-and-operated TV stations in both Philadelphia and New York.
"Kids is also very popular," Addis said. "And we hope to have more gold-plated content in the next 60 days."
In some markets, Comcast later this year will add digital video recording capabilities in conjunction with VOD, Addis said.
The MSO is also examining on-demand ad-sales models, which would give basic programmers a greater affinity for the FOD platform.
"We can track viewership precisely," Addis said. "There is a significant opportunity over time with the ad revenue business."
Addis envisions a day when networks can show viewing ratings to advertisers, whether those viewers are watching linear TV or VOD.
The free on-demand aspect of Comcast's VOD service is meant not only to keep digital subs and acquire basic homes, it also could be used as part of an effort to win back DBS customers, Addis said. Comcast surveyed 800 satellite subscribers, asking if there was interest in returning to cable via a $400 buy-back offer. Less than 1% of respondents said yes, Addis said.
But when the same group was asked about a $400 buyback offer plus 1,100 hours of video-on-demand, 3.5% of respondents said yes.
"We think on-demand is highly leverageable to win back subscribers and leverage growth," Addis said.
The HDTV edge
Addis also touched on the importance of HDTV to Comcast. He said about 60% of today's HDTV buyers gravitate towards cable, while 30% gravitate towards DBS and 10% use over-the-air connections.
"We're confident we can shift that share from 60% to 80%," he said. "With cable, there is no equipment to buy and installation is simple. We can offer basic local channels in HD. It's tough for DBS to put antennas on roofs for local HD."
Addis said Comcast also would continue to push its retail HDTV presence. The company uses a welcome kit valued at $250 within Best Buy stores to push Comcast's HD service. "We're targeting an aggressive expansion this fall," he said.
Eighty percent of the pre-merger Comcast systems and 50% of the former AT&T Broadband systems will be HD-ready by year-end, said Addis. The former AT&T systems include: Atlanta; Jacksonville, Fla.; Tampa and Miami, Fla.; Pittsburgh; Richmond, Va.; Dallas; Denver; Portland, Ore.; Salt Lake City; Chicago; Sacramento, San Francisco and Los Angeles, Calif.; Boston; Seattle and Grand Rapids, Mich.