VOD Still Not Worth the Price, Some Argue

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Los Angeles -- While video-on-demand will play a role inthe future of pay-per-view movies, some PPV executives believe near-VOD will be the mostcost-effective way of offering movies for the forseeable future.

Conventional wisdom among most industry observers is thatVOD technology -- which provides instant access to hit moves as well as hundreds ofcatalog films -- will inevitably be the catalyst that will propel PPV buy-rates and helpsell digital boxes into consumers homes. But several panelists speaking at the CTAMPPV/Digital conference here two weeks ago believe an NVOD operation with half-hour starttimes may provide enough of a buy-rate increase over analog PPV while keeping plantupgrade costs down.

Jeffrey Calman, senior vice president of sales, planningand business affairs for Warner Bros., said buy-rates from current NVOD and VOD tests runabout even, although he did not provide specific figures. Given the high cost ofimplementing video file servers and upgrading system plants to accept VOD technology,Calman said operators are probably better off maintaining an NVOD movie service.

"There's no discernible difference between NVODbuy-rates and VOD buy-rates," Calman said. "It's far more expensive to doVOD than to do NVOD, and there's no [bandwidth] room for VOD experimentation."

DirecTv Inc., which generates monthly buy-rates of 150percent to 200 percent with its 50-channel NVOD operation, said it has no plans to upgradeto VOD because the buy-rate increase does not justify the upgrade costs. A recent DirecTvVOD test yielded a buy-rate boost of only 15 to 20 percent over NVOD numbers, saidStephanie Campbell, senior vice president of programming for DirecTv.

"We just don't feel [the increase] is enough tojustify the cost," Campbell said. "We're satisfied with the business wealready have."

But Jim Miller, senior vice president of entertainment forDiva Systems Corp., which offers a file server-based VOD service, said that itspreliminary early tests show that VOD doubles buy-rates from cable operator and DBS-basedNVOD offerings. The company is currently offering about 250 different titles per month viaVOD through trials with Lenfest Communications Inc. and Adelphia Communications Corp.systems around Philadelphia.

"We're certainly finding more than a 15 percentto 20 percent buy-rate increase in the pure VOD market during our five to six months ofoperations," Miller said. "Choice, convenience and control: Those are threethings that pure VOD offers consumers -- the chance to watch the movie when you wantit."

Miller added that plant upgrade costs can be subsidized byother applications beyond VOD, including cable modems and interactive services.

"In terms of bandwidth, it's limited to two tothree 6 megahertz channels, so we're not necessarily talking about a lot of bandwidthfor what we're offering," he said.

VOD is also very lucrative in the hotel PPV business, wherehit movies -- along with other interactive services -- bring monthly room revenue to $27to $30, said Phil Knudsen, vice president of Western Region sales for SeaChangeInternational.

"[VOD provides] $30 plus per room, per month and 45percent to 55 percent cash-flow business," Knudsen said. "It looks like a cablesubscriber and looks like one financially, so it's an opportunity for cable operatorsto get involved in VOD even before they go digital."

While the numbers are impressive, several speakers warnedthat the implementation of VOD technology goes beyond just offering movies and services.They said that operators will have to go through a very extensive technological change tointegrate VOD with its existing infrastructure.

"It's more than movies; you have allthe back-end systems that have to be integrated into a cable operation, including billingand asset management, said Rick Colletto, vice president of programming for TVNEntertainment. "We first need to get into what digital is and how to use it." 

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