Cablevision Systems Corp. plans to launch video-on-demand services in its core metro New York market later this year, using SeaChange International Inc. equipment.
The launch is a big coup for SeaChange, considering that Cablevision conducted a VOD trial last year in New Jersey with Diva Systems Corp., a key rival. Earlier, Cablevision-one of the first MSOs to test VOD-ran a trial with AT&T Broadband and Silicon Graphics Corp. on its Long Island system.
SeaChange, whose core business is the sale of ad-insertion servers, had an existing relationship with Cablevision in that field.
"That broke the tie," said Cablevision executive vice president of technology Wilt Hildenbrand, explaining why the MSO picked SeaChange over other VOD vendors.
Cablevision expects targeted ads to eventually be a subset of video-on-demand, Hildenbrand said, suggesting the company would eventually integrate its ad-insertion and VOD systems. That was also a factor in the decision to go with SeaChange, he noted.
The MSO plans to offer VOD to 5,000 homes in its Long Island system by the end of the year. Full deployment will begin during the second quarter of next year, Hildenbrand said. The MSO hasn't determined how many movie titles it will initially offer subscribers, he added.
SeaChange is only the fourth vendor with whom Cablevision has announced an agreement for its advanced digital rollout. Its largest deal for the digital launch was its $1 billion set-top order from Sony Corp. of America in September 1999.
The MSO has also reached deals with NDS Group for conditional-access equipment and Harmonic Inc. for modulation equipment.
Although the SeaChange deal isn't exclusive, it doesn't appear that Cablevision will cut new VOD deals in the near future.
"If SeaChange does well, it's going to be hard to bump them out," Hildenbrand said.
Executives at Diva, which had conducted a trial with Cablevision, appeared to be taking the SeaChange deal in stride.
"No one ever expected this to be a one-vendor business, so in many respects this is just further evidence of how much momentum there is in the VOD sector overall," said Diva spokesman Pat Gushman.
SeaChange vice president of ITV sales Susan George said the Cablevision agreement was actually reached more than a year ago, but the companies didn't get around to announcing the deal until last week. The integration work between Sony and SeaChange began more than a year ago and is nearly complete, she added.
The companies didn't disclose terms of the deal, but George noted the SeaChange VOD system, which includes "MediaCluster" servers and automation software, costs cable operators about $300 per stream.
In a report last week, Morgan Stanley Dean Witter analyst Gary Lieberman estimated that the Cablevision deal could generate up to $120 million for SeaChange through 2005.
Few U.S. MSOs have finalized their VOD plans. AT&T Broadband announced a three-market, 600,000-home commitment with Diva, but is still considering other vendors. Insight Communications Co. and Charter Communications Inc. have also cut VOD agreements with Diva.
Time Warner has launched VOD in a handful of markets, dividing its deployments between SeaChange (Austin and San Antonio, Texas) and Concurrent Computer Corp. (Hawaii, Houston, and three Florida cities).
Time Warner spokesman Mike Luftman said the MSO plans to announce additional deployments with SeaChange and Concurrent.
George hinted that SeaChange has a significant deal with Time Warner. She said she believes it to be bigger than the Cablevision pact, which encompasses up to 2.9 million subscribers.
SeaChange has also announced a trial with Comcast Corp., but George said to look out for announcements of additional SeaChange markets from that MSO as well.
In September, nCube Corp. announced an agreement with Blockbuster Inc. and Enron Broadband Services to launch a VOD service, but the vendor has not reported any deals with U.S. cable operators. Several other companies are vying for VOD hardware distribution, including relative newcomer Unisys Corp.
SeaChange obviously hopes the Cablevision agreement will help it close additional distribution deals.
"I think it bodes well as a validation for those who have already selected us. And for those who are considering us, it's further validation that they're making the right decision," George said.