Operators' concerns about obtaining Hollywood product for video-on-demand deployments grew last week when studio powerhouse Buena Vista Television pulled its product from VOD servers for the foreseeable future.
Though Buena Vista officials said the move was a temporary effort to examine the VOD landscape, the studio joins Paramount Pictures and Sony Pictures in withholding its product for VOD distribution. The decision leaves operators without some major Hollywood titles to help fill in the monthly VOD schedule.
The Walt Disney Co.-owned Buena Vista's move comes at a tenuous time for the industry, which is beginning to launch VOD in concert with ambitious digital system upgrades.
Most industry executives point to VOD as digital cable's "killer app," as it allows consumers to watch content on demand and employs VCR-type features such as fast-forward, rewind and pause capabilities.
But Hollywood movies are arguably VOD's most attractive and potentially lucrative content source. And with three studios currently not participating in the technology, the fledgling VOD industry will miss a number of top titles.
Buena Vista Television will not offer its February titles to such VOD content providers as In Demand, Diva Systems Corp., Intertainer Inc. or SeaChange International Inc., Buena Vista Pay TV vice president and general manager Dan Cohen said.
The studio has a light February schedule, so VOD initially will not be hurt by the change.
Cohen said the studio wants to take a look at its options before it licenses movies to VOD distributors.
"We have been licensing on a handshake with no formal output deals," Cohen said. "We have told these distributors we want to pause and re-examine the marketplace, but we haven't made a decision that would put us out of VOD."
VOD content providers said they were optimistic that Buena Vista's product would return soon.
"Buena Vista has been a great partner over the last few years. We realize their need to re-evaluate the VOD landscape, and we're confident that our relationship will continue to flourish in the future," said Intertainer executive vice president of content and marketing Mark Sonnenberg.
Cohen hinted that the studio's VOD exodus could be of short duration. Although the studio won't make new titles available, operators are still offering several January Buena Vista titles via VOD, including Gone In 60 Seconds, Scary Movie
and Boys & Girls, which carry 90- to 120-day PPV windows.
He added that Buena Vista could complete deals that would restore its titles to VOD before the windows on its January titles elapse.
"My expectation is we'll be licensing and distributing titles by the time the [January] deals expire," Cohen said.
Cohen would not reveal what type of deal the studio is looking for in a new VOD deal. But sources close to the situation said some film companies have asked for a much greater percentage of the VOD revenue split than the 50-percent cut they currently receive from traditional pay-per-view buys.
The studios, which have been disappointed by the PPV business' historical revenue returns, have been reluctant to sign long-term VOD agreements with cable providers.
They're also keeping a close eye on the development of alternative distribution technologies, such as the Internet.
Sony Corp. of America, in fact, has set an April launch for its Internet-based VOD movie service and expects to have several major studios on board.
An Internet-based VOD movie service could pose a major blow to the industry, especially if product is exclusive or priced lower than cable's offerings.
Industry executives have downplayed Web-based ventures, calling cable's current infrastructure more reliable and more secure than the Internet.
Cohen said it was "too early to tell" whether VOD has been a financial or performance success for the studio.
"There aren't enough homes offering VOD and there hasn't been enough marketing to determine how the product will perform," Cohen said. "We're not saying that VOD isn't a good thing or that these entities aren't credible, and we hope to be back in the business as soon as possible."
Nevertheless, the current VOD environment has made some operators nervous.
Cox Communications Inc. president James Robbins said last week he has some concerns about how add-on video products-such as digital cable and video-on-demand-will fare if the economy continues to slow and consumer costs rise for such staples as electricity.
Another MSO executive who wished to remain anonymous also said that company is worried about VOD's immediate future.
"There's no secret that the studios are pulling back, and we're very concerned about the financial viability of the service without major studio involvement," said the executive.