What Will It Take to Move VOD Forward?


For a large batch of programmers, there was a pretty important meeting with the folks from Nielsen Media Research at last month's National Show in Chicago. The focus: Nielsen's ability to provide ratings for video-on-demand content.

Any such action — and Nielsen's plans are detailed elsewhere in this issue-— would be an important step forward for VOD.

The reason: VOD could be a strong three-trick pony for cable, with free video-on-demand, subscription VOD and transactional VOD. But even its most ardent admirers would have to admit that VOD is barely a one-trick pony now.

Let's start with transactional VOD. The cable industry now has every major studio supplying on-demand movies to some or all of the major MSOs. That is no small feat, considering the uphill battle In Demand waged to land those contracts.

There are also indications that VOD movies are being marketed more aggressively. In Demand helped Cox Communications Inc. lift buy-rates in Southern California with a steamroller-flattens-the-videotape promotion. And Universal Television Distribution partnered with Comcast Corp. on a unique FOD/VOD promotion surrounding Eminem's 8 Mile
and associated music videos.

But it's not enough. As nearly every MSO now has almost every hit movie — some with windows of less than 30 days — there should be VOD movie marketing stories every month. The cable industry can't be proud of 100% VOD movie buy-rates. In truth, buy-rates should be somewhere in the 200% to 300% range.

SVOD has gotten off to a similar good-news/bad-news start. Time Warner Cable is leading the charge, boasting more than 500,000 SVOD subscriptions at $6.95 per month. That's more than $40 million in revenue, split with the service provider, each year — not too shabby.

The jury is out on whether package pricing of SVOD, at no incremental fee, will prove economically beneficial for either party. But when you combine that uncertainty with the fact that many MSOs have yet to roll out SVOD — and the fact that the carriage-terms lawsuit between Comcast and Starz Encore Group LLC is likely to retard growth even further — SVOD has yielded a mixed bag of results.

At best, the half-starts on VOD and SVOD combine to give cable one trick of the three-trick pony.

Free on-demand is an even bigger crapshoot. Comcast says digital churn is less in active FOD homes than non-active FOD homes. That's an encouraging trend, and if it is borne out across Comcast's entire subscriber base, it will be important for cable going forward.

But the lack of marquee FOD fare means that Comcast has been forced to go with what had been traditionally secondary sources of product. Some programming may not be good enough to stick — even as FOD. But other content, such as music videos and animation, may wedge its way to legitimacy, just as eBay and Amazon.com are now deemed Internet successes.

Still, popular programming, including basic-cable network fare, remains out of VOD's reach because of ratings and advertising issues.

It is in the cable operator's best interest to be cooperative and speed efforts with Nielsen, or whomever, so that a bonafide ratings system for VOD can be developed. Once programmers can promise advertisers legitimate ratings for VOD, they'll be more open to giving their best product to the platform.

Think about Discovery Channel's Walking With Cavemen, a special that aired several weeks ago. That show could have very well been on the VOD platform within days or one week of its initial airing. Viewers who missed the program or heard other office workers talking about it the next day could have found it on the VOD platform that night.

That's why the work of Nielsen and others is so important for cable. Nielsen's appearance at the National Show came under the banner of the Cable & Telecommunications Association for Marketing's On Demand Consortium, an important, pan-industry collaboration working on VOD metrics and marketing issues.

If VOD is going to reach maturity, it needs to market its hit movies better to really make a run at home video, to make SVOD widely available under whichever economic model works, and to develop a system in which ratings can be delivered to advertisers for "free" on demand product.

Only then will the cable industry understand exactly what it has on its hands in VOD.