Video-on-Demand Advantage: Cable - Multichannel

Video-on-Demand Advantage: Cable

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As cable marketers converge in Los Angeles this week for the annual Cable & Telecommunications Association for Marketing Digital Conference, we will have an opportunity once again to discuss some of the industry's best marketing ideas and practices.

Everyone can benefit from sharing great ideas — campaigns that are successful in one market can often be customized to work in another. If we learn from each other's mistakes and successes, we can improve the category for everyone. It is with this in mind that In Demand and CTAM have sponsored the case study competition for many years. We are very grateful that Multichannel News
joined us as our strategic partner last year.

Over the years, this conference has undergone a transition from pay-per-view to digital and now to video-on-demand. This year, for the first time, an operations case study winner will be recognized for successfully launching VOD.

Just one year ago, the conventional wisdom was that VOD would be delivered by dozens of well-heeled dot-com companies and digital subscriber line providers, including one of the largest companies in America — Enron Corp. Many of these companies have either abandoned their plans or ceased to exist. Cable was largely ignored by industry observers or relegated to taking a back seat to the new media.

Well, those pundits were wrong. VOD on cable no longer takes a back seat to anyone. It is the cable industry that has the secure technology, the broad distribution and the access to capital to build an infrastructure that will be virtually national in scope. Advanced services like high-speed Internet access and VOD are the engines of future growth for cable. VOD on cable is not just a promise: It is a reality that today can be accessed in almost 1.5 million households. That number is expected to increase significantly over the next year, with aggressive rollouts planned by many of the major MSOs.

CABLE'S GOT GAME

Barely seven months ago, there were no VOD agreements in place with the major studios. Today, cable has reached a critical mass of Hollywood content.

Over the past seven months, In Demand has been able to deliver VOD content from studios that represented more than 50 percent of the 2001 domestic box office. We also have augmented that programming with content from dozens of other programmers to accumulate over 1,000 hours of movies and shows that we now deliver to our VOD affiliates.

Cable's VOD momentum began building in the second half of 2001, triggered by a VOD studio agreement with Artisan Entertainment, and followed up almost immediately with a major agreement with Universal Vivendi S.A. On the heels of the Universal agreement, we added VOD content from Sony Pictures and, shortly afterward, from Dreamworks SKG.

Late last year, we also announced a VOD agreement with Hallmark Entertainment, the world's leading producer of television programming, and with ESPN, the world's leader in sports programming, for hundreds of hours of family entertainment and classic sports programming.

These agreements will supplement the VOD deals we have with some of the nation's leading cable networks, including BBC America, Hallmark Channel, ESPN, Comedy Central and Court TV, as well as children's TV programmer Sesame Workshop. All of the agreements help to illustrate the desirability of cable's digital platform, its ability to offer true VOD and its position as the premiere provider of content to the home.

With all this product, only digital cable will be able to offer a virtual entertainment center to its subscribers. Unlike the one in the mall, this entertainment center requires no travel, offers consumers what they want when they want it, only charges for the product that they actually watch and never, ever charges "late fees."

VOD has the ability to go beyond just delivering recent motion pictures and popular television programming entertainment. Time Warner Cable's Hawaii-based Oceanic Cable, one of the first systems in the country to deploy commercial VOD, also provides its subscribers with a menu of interactive services. Those services include not only pizza, karaoke and sports — all on-demand — but time-shifted local television viewing as well.

ANTICIPATING VOD's ARRIVAL

Cable subscribers want video-on-demand. A recent survey Sage Research conducted for Cisco Systems Inc. showed that 44 percent of consumers indicated they were willing to pay for entertainment products delivered via broadband networks, including cable, DSL and wireless. Of the entertainment services that consumers were most willing to pay for, movies-on-demand headed the list. Concerts and cultural events ranked second, and TV shows on-demand came in third.

CTAM's own research shows that consumers have ranked VOD as their first choice, ahead of personal video recording, interactive programming and electronic mail, just to name a few. And, a recent study by Horowitz Associates shows consumers rank VOD as their No. 1 choice of digital service — ahead of picture and sound quality, interactive programming guides and multiplexed pay services.

None of this is particularly surprising. Over the past decade, Americans have had an insatiable appetite for renting movies. If you provide consumers with an opportunity to start a program whenever they want, pause for a break if they want and watch a chase scene several times — all without the inconvenience of returning tapes or paying late fees — then VOD on cable becomes a wonderful consumer proposition and, therefore, a terrific business.

Clearly, it is digital cable and not the Internet that will deliver this consumer proposition. Gartner G2, a San Jose based research and advisory firm, has just released a report titled Coming Not-So-Soon: On-Demand Movies.

While Internet VOD was hyped as "the next big thing," according to Gartner, "substantial Internet video-on-demand services will not roll out in the United States until 2005."

This is the time for cable to stake out the territory and brand itself as the best and easiest place to get VOD. The competitive advantage is ours, and the time to capitalize on that is now.

VOD on cable provides an even more compelling way to compete with DBS. With the upgrading of its systems and the expansion of its product offerings with multiplexed pays, NVOD and out-of-market sports, our industry finally caught up to DBS. VOD on cable provides cable with a consumer-friendly, easy-to-use technical advantage over DBS. Finally, it is cable that is delivering a better all-round product, and that will help us not only to keep our customers, but to welcome back former subscribers.

UPCOMING CHALLENGES

A number of the large MSOs are in the process of introducing iControl as a brand for the new interactive functionality, which they will be offering. With the power of iControl technology, the subscriber will be able to take real control of his or her television set, watching any product on the system's server whenever he or she wants.

With iControl, the customer effectively has a 500-hour (or more) video store available in their home — and the ability to instantly start, pause, rewind or fast forward movies and other content, accessible at any time with the click of a button.

As always, the most important rule of retail is to keep your focus on your customers. We need to make a compelling case for our subscribers to stay with cable and for former subscribers to return from DBS. We now can offer them something special — something they value and want. We are confident that VOD has the potential to become one of the great drivers of the platform.

Digital conferences such as this provide a forum for discussion and for the sharing of ideas and tactics that we need to implement to achieve our collective goals. We promise to do all that we can to contribute to this process and provide a reliable link between great content, great ideas and cable's great digital platform. Have a great convention.

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