Drowned out lately amid talk of authentication and online access to pay TV shows, video on demand on the TV was a big discussion point at CTAM Summit ’09 sessions last week.
Proponents called it a difference-maker for cable operators against satellite TV. Ad-supported VOD, though, is still a very small business, and fans of the medium hoping for a breakthrough expressed frustration at technical limitations.
“We’re at the point now where trends are happening and we have technological opportunities to allow video on demand to go to the next level,” Fox Cable Networks CEO Rich Battista said during an Oct. 27 general session, saying technologies like dynamic ad insertion and interactive advertising pose great potential for the product.
But Battista, wary of his other constituents — mainly advertisers — said what will drive the success of any new product will be the willingness of cable operators to disable the fast-forward function that allows viewers to skip ads. Battista pointed to Cox Communications’ MyPrimeTime product, which allows customers to access VOD streams of a number of popular broadcast and cable shows on their TVs, but without the fast-forward option.
“Consumers don’t mind disabling fast-forward as long as they have convenience,” Battista said. He added that VOD ad potential has barely been tapped, estimating it at $140 million out of annual cable ad revenue to $27 billion plus. “I think there’s massive potential still for VOD” once search and ad-insertion barriers are removed, he said.
While Time Warner Cable chief technology officer Mike LaJoie said dynamic ad insertion has been technically possible for several years, it’s not used widely. Doug Sylvester, chief operating officer of VOD technology provider Avail-TVN, said it’s very difficult for a small programmer to build a business around on-demand.
“Absent affiliate fees, absent a strong advertising model, they’re not going to be able to survive,” he said during a breakfast discussion at the summit, an event hosted by Multichannel News and Broadcasting & Cable.
David Purdy, vice president and general manager of Canadian MSO Rogers Communications, said during the same breakfast panel on Oct. 27 the consensus seemed to be that dynamic ad insertion — the ability to quickly swap out ads shown on VOD — couldn’t be a reality for another two years. “I think that’s a real tragedy,” he said.
It can take two weeks or a month to get usage data from multiple measuring agencies, which makes a VOD ad sale harder, Purdy said. He joked with a questioner at the panel session: “I really encourage Rentrak to merge with Nielsen and then do a deal with Comscore. That would be really helpful for us.”
Sylvester said a lot of energy is being invested at Avail-TVN in developing technology to help programmers monetize VOD. In June, the company said it was partnering with BlackArrow on dynamic ad insertion.
VOD programming also is harder to find and access than it should be. Battista referred to the way programming is presented at online video site Hulu (a joint venture that includes Fox).
“How do we figure out how to create a better experience on the on-screen guide?” he asked rhetorically on the same panel as LaJoie and Comcast chief technical officer Tony Werner. While pointing out that he used to oversee program guide maker Gemstar-TV Guide International, he said guides now don’t even include poster art for VOD movies. “It’s hard to pick a VOD movie on cable,” he said.
LaJoie said the biggest hurdles to improving the guide interface are rudimentary remotes and millions of older, memory-starved set-tops. One of cable’s biggest priorities is to bring Web-style search to the television.
Time Warner Cable has implemented fast-forward disabling successfully in products like Start Over, which lets a viewer restart a program that’s already in progress. That emerged from the Mystro headend-based DVR project that, as Bright House Networks president Nomi Bergman pointed out on the panel with LaJoie, foundered over an inability to get rights to store the programming.
“The biggest blocker to video on-demand has been the ability to get past the business issues,” LaJoie said.
Werner said the latest guide release trims the time lag between calling up a VOD program and its appearance on the screen to three-to-five seconds from seven-to-nine seconds, “which is noticeable to the consumer.” Comcast has more than 1,000 high-definition choices on demand at any given time and has, to date, delivered more than 13 billion VOD streams. Better searching, he said, is coming and “is the big piece to break the back on.”
Purdy and Michael Rahimi, senior vice president of marketing and consumer services at Mediacom Communications, both said two-way VOD services help hang onto subscribers. “It is our true video differentiator” against satellite television, which remains cable’s biggest competitor, Rahimi said.
Purdy said VOD helps reduce churn; that in itself is a payoff, whether or not the content brings in revenue.