Premium Nets In Diva's Plans

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Recognizing the studio video-on-demand logjam, Diva Systems Corp. is actively pursuing subscription VOD rights for the three major premium services.

The move comes as Diva strives to remain one of the largest providers of VOD technology and content to operators. Recently announced deployment deals with Charter Communications Inc. will place Diva's VOD technology and services in 60 percent of the commercially launched VOD services in the U.S., and company executives feel confident Diva can and will attract more operators in a very competitive environment.

While the company has relationships with six Hollywood studios, Diva president and CEO Henk Hanselaar said the dearth of full studio participation in the VOD sector remains a concern. Paramount Pictures Corp., Buena Vista Television and Sony Pictures continue to withhold recent releases from VOD systems as they determine the best course of action regarding the new technology.

As a result, Diva is talking with Home Box Office, Starz Encore Group LLC and Showtime Networks Inc. about deploying SVOD services this fall. Given the uncertain status of studio negotiations, Hanselaar said, operators are beginning to plan SVOD launches as part of their overall VOD service.

"The availability of content is not as big an issue as it was three or four months ago," Hanselaar said. "The MSOs are starting to feel comfortable with the SVOD model because it will provide an additional source of content."

Hanselaar added that in his view, the Hollywood studios will eventually come around.

"Clearly, the studios understand the compelling consumer proposition of VOD," he said. "I think they're positioning themselves so that when VOD takes off, they are not leaving money on the table."

While marquee studio product will inevitably be the major driver for VOD buys, Diva executives said subscribers have shown significant interest in alternative programming.

A surprising 20 percent of Diva's current VOD buys are comprised of library titles and a kids' SVOD package of programming from such networks as PBS, Cartoon Network and Disney Channel, Diva vice president of programming and marketing Bev Doughty said. The "kids unlimited" package retails for around $9.95 per month.

Diva reports that 53 percent of its VOD buys are new releases, while adult product represents 26 percent of the remaining purchases.

Non-movie content also allows operators to drive VOD usage from varied times throughout the day and week. While purchases of top movies tend to peak during primetime, buys for childrens' and library programming skew higher during the early morning and afternoon — timeframes that broaden VOD's appeal.

"The value of adding different types of content is that different content gets watched at different times of the day," Doughty said. "If a cable operator is making an investment in putting this hardware in the headend, you want to maximize the use of that hardware throughout the day.

"Also, there's a philosophy that VOD is a weekend service, when in fact we find that more than 40 percent of our viewing takes place Monday to Thursday."

Overall, systems powered by Diva's VOD services average buy-rates of between 1.5 percent and 2 percent per month, per subscriber, without significant marketing and promotion. All told, the company said it has generated nearly 1 million buys from its nearly 100,000 VOD subscribers since its 1997 launch.

Last week, the company announced it would provide its VOD services to Charter systems in Ft. Worth, Texas, and St. Louis, representing 650,000 basic subscribers.

Hanselaar said that with capital costs to implement Diva's VOD service at $500 per stream, MSOs can realize a return on investment in less than two years.

"The emphasis for us is that we're here, we have the solutions and we can be a viable partner to the cable operator," he said.

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