Too Demanding


Philadelphia — Nine years after cable operators began hyping video on demand as a key weapon to battle new competitors, major MSOs and cable networks still don't see eye to eye on how to use the technology.

“We're creating a business model where one of us is winning and one of us isn't,” Nickelodeon Digital Networks executive vice president and general manager Tom Ascheim said at a panel session here last week during the annual CTAM Summit.

While most operators have widely deployed VOD, the most popular shows on TV still aren't available through on-demand platforms, since top programmers at Viacom Inc., NBC Universal, Fox Cable Networks Group and other firms refuse to supply the programs unless operators cough up money for them.

Instead, many have put lesser programs into free VOD form as a way to satisfy demand from top cable companies such as Comcast Corp. and Time Warner Cable.

The stalemate has created a dilemma for major MSOs, who say they want to use their ability to offer popular broadcast and cable-network shows on VOD to help stave off competition from DirecTV Inc. and EchoStar Communications Corp., and to solidify their subscriber base before Verizon Communications Inc. and other telcos deploy advanced video services via fiber networks.

Another resounding theme from the Cable & Telecommunications Association for Marketing's gathering was an acknowledgement from all industry players — operators, programmers and advertisers — that the consumer is clearly in control. With broadband Internet video proliferating, along with ad-skipping digital video recorders and video delivered to mobile phones, executives said it's crucial for operators and programmers to reach a truce on a business model for VOD that works for all players.


“If the industry doesn't get its act together, it [ad revenue] will shift to technology that will,” Atlas On Demand senior vice president and general manager Scott Ferris said at the same panel. He predicted more ad revenue would shift to the Web, where media buyers are already getting more detailed reports about how viewers use their content than the data cable operators supply about who watches VOD programs.

In some ways, the cable industry has taken a step backward when it comes to the delivery of top network programs to VOD platforms. In 2002, Cablevision Systems Corp. drew a lot of attention when it began offering Fox's 24 and sister network FX's The Shield on its iO: Interactive Optimum VOD system, soon after the episodes aired live. But that experiment only lasted a few months.

“We'd love to be further along, but there are some fundamental questions that need to be worked out,” NBC Universal vice president of new media Ron Lamprecht said at a Multichannel News breakfast panel last Tuesday during the CTAM confab.

Lamprecht and Ascheim also griped that cable operators collect monthly subscription fees from leasing digital video recorders to subscribers — which allow subscribers to skip their ads — and that programmers don't receive a cut of DVR revenue.

“There's no payment whatsoever,” Lamprecht said. “That's a negative precedent in our minds.”

Comcast Spotlight vice president of new business strategy Warren Schlichting insisted Comcast wants to help programmers, but called on industry players to take a more entrepreneurial approach when considering new business models for VOD.

“It's incumbent upon us to get a viable business model for programmers,” Schlichting said.

Traditional advertising does not work well for VOD platforms, Schlichting said, noting that running a single ad before the start of a VOD program has proven more effective at keeping the viewer tuned in. “We don't see [30-second spots] on VOD as being something people are willing to sit through,” he said.

With a number of operators offering different models for on-demand, ranging from Comcast's free VOD to Cablevision's subscription VOD-based efforts, panelists speaking during a session on monetizing advanced video services said an industry standard has to emerge in order to maximize the message to consumers.

If not, the industry risks losing its lead positioning with consumers regarding VOD to DirecTV and EchoStar. Both companies are working on pseudo-VOD distribution through content downloaded to digital-video recorders.

“We need to own this [technology] while we have an opportunity to do so,” Time Warner Cable senior vice president of programming Lynne Costantini said.


On the content end, Scripps Networks senior vice president of emerging media Channing Dawson said content providers are still wary of providing proprietary programming for a VOD platform unless a financially viable business model emerges, whether from advertising or subscription fees.

“We have to monetize [VOD] or we can't play in the game,” he added. But from an advertising standpoint, Costantini said, the audience-measurement technology from Nielsen Media Research hasn't caught up with the product, making it difficult for advertisers to support on-demand programming. “We need to work harder to make [the business model] work for it to be a win-win for programmers,” she added.

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

R. Thomas Umstead and Jeff Baumgartner contributed to this report.