VoD Has Its Technical Challenges, Too

By Valerie Milano

Traditional broadcasters are expressing frustration over their inability to implement VoD as a viable business. “One of the reasons we are struggling with VoD is because of concerns with cannibalizing our broadcast content,” explained Fox Sports Network president Bob Thompson. “We need to make VoD have extra value by offering content you wouldn’t see on the regular broadcast.” Mark Greenberg, Showtime’s evp for corporate strategy, added: “Differentiating content is essential for VoD; you need to give consumers something that’s not available on a linear channel. Bandwidth issues, he said, “will put a different pressure on us; we haven’t seen the economies of scale with VoD. But two million subscribers tells us consumers want control and choice and are willing to pay for it.” Greenberg also observed that premium services have an advantage because they are not dependent on advertisers.

Another advantage premium services have with original series is that there is no issue over rights. Dave Zuylav of NBC Cable Nets said, “NBC doesn’t have the same flexibility that Showtime has because we don’t own all our own content. In many cases, it’s not clear who owns what. When we got involved in IT, the feeling in the room was that it would change the way people watched television. And then it fell flat. But now, with the technology that’s out there today, for the first time it seems that it is impacting the way people watch TV,” said Zuylav. “The biggest difference between VoD and HD is that everything right now is pushing toward HD. The costs are moving aggressively down, consumers are embracing it and MSOs are pushing it. The bigger challenge is in the VoD space, such as getting digital boxes into enough homes. With only 20 percent of homes equipped, the value package isn’t there for the consumer,” he added. “Plus, because there’s no business model, there’s very little serious content available. VoD is up in the air and stymied. We content providers need to wake up to PVRs and make VoD viable.

“Technology is moving without us because we don’t have a business model to monetize the content. The real currency for advertisers is Nielsen and we need them to step up. Scale matters, but until you get Nielsen to measure VoD and PVRs, we won’t get that business model,” concluded Zuylav.

Even so, some small cable brands, such as the Animé Network, are now finding creative ways to implement VoD as a promotional tool. “For us, the economics in the short-term are not very important,” explained president Kevin Corcoran. “VoD allows us to compliment our others businesses - DVDs, publishing and the network itself.”

The big unknown looming over the business is the hotly debated issue of whether or not there will be enough bandwidth to accommodate all the major players. “There is only a finite amount of bandwidth available,” HDNet founder Mark Cuban said. “A lot of companies are taking a wait and see approach and while they do, the real estate is going to become more and more valuable. Networks are making the argument that compression will save the day. I’m going to bet it won’t; compression is not going to be the answer. The more HD and VoD become successful, the less room there will be, and some major network is going to find themselves kicked off the island.”