New York-A variety of on-demand programming options is necessary for operators to reap the maximum amount of revenue from video-on-demand services, several industry executives said at a conference here last week.
While blockbuster movies will be a major driver of VOD revenues, executives at a Paul Kagan Associates Inc. VOD conference recommended cable provide its subscribers with a wide variety of on-demand programming if it is to maximize revenues while thwarting competition from alternative distribution technologies.
Consumers will respond more readily to a variety of on-demand programming options that go beyond top movie titles, they said. "Having eight to 10 movies on a VOD server won't be enough," Intertainer Inc. chief operating officer Caroline Beck said during a panel on VOD content.
Cable operators can use the VOD platform to help the industry differentiate itself from its competitors while driving buys and revenue, In Demand senior vice president of distribution and product development Rob Jacobson said.
Along with the top movies-and maybe more targeted services, such as news or sports highlights on-demand-the industry could offer such programming as local high-school plays, sports and other interactive community activities that direct-broadcast satellite services can't deliver.
"The one advantage that cable has is the ability to localize programming in a way that DBS never will," Jacobson said.
The development of differentiated programming could help the industry to increase pay-per-view usage among viewers. "With the product and through VCR functionality, [VOD] has the ability to not only provide additional buys, but also to reach the nevers' category," Jacobson said.
Also, the executives pointed to the potential of virtual networks: Small or niche basic services could offer a block of programming on-demand. Along with that, potential revenue streams such as sponsor advertising for programming and electronic commerce could arise and tie into on-demand programming.
But the industry will have to move quickly to deliver such options before other alternative distribution technologies such as the Internet or VDSL (video over digital subscriber line) enter the home first. "If we don't deliver [programming variety] to [subscribers] on a real-time basis, they'll go to another format," Beck said.
Starz Encore Media Group LLC chairman John Sie, another speaker, called for the cable industry to completely convert its subscribers to digital or risk losing out to its competitors.
He added that DBS and other consumer-electronics industries are now aggressively rolling out set-tops with hard drives that offer consumers VCR functions such as pause, fast-forward and record.
"Cable modems and cable telephony are attractive line extensions of cable TV's core video business, but cable operators should not view digital cable as another line-extension business," Sie said. "Instead, they must adopt the mind-set of a full digital conversion from the current analog base as soon as possible."
A variation of VOD-subscription VOD from pay services such as Encore and Home Box Office-could drive digital set-tops into the home, Starz Encore vice president of subscription, communications and VOD Greg DePrez said.
HBO vice president of interactive ventures Sarah Cotsen said her network is developing its own subscription on-demand service that will mostly feature its original-programming product.
But several panelists speculated that SVOD might ultimately cannibalize the still-available analog-PPV business. Jacobson warned that the additional $5 to $6 in monthly SVOD revenue could simply be subtracted from potential PPV purchases, cutting into operators' and studios' earnings.
Cox Communications Inc. director of media technology John Hildebrand also expressed concern that operators would be forcing a premium buy-through on subscribers just to have access to SVOD, rather than giving them a choice of either or both options.
Hildebrand-who said Cox expects to have digital in front of 75 percent of its subscriber base and 1 million digital set-top boxes in the field by the end of the year-believes a variety of VOD programming offerings will be the best way to increase revenue.
"We see these new services as a way to take a number of basic customers into digital, where we can generate incremental revenue," he added.
But the promise of VOD won't be realized if operators don't aggressively market the product, according to the executives.
"The success of NVOD and VOD comes down to marketing. The operators have to start to look at how to market the new technology," TVN Entertainment Corp. senior vice president of new programming development and distribution Stephen Rockabrand said.