By: Unknown
From: The Philadelphia Inquirer
By Tony Gnoffo, The Philadelphia Inquirer
Oct. 14--PHILADELPHIA -- Video-on-demand -- the video store in your remote control -- was for two decades the gee-whiz technology just over the horizon.
Welcome to the other side of the horizon, where "gee whiz" often morphs into "so what?"
To be sure, VOD has made a big splash. Comcast Corp., the nation's largest provider of cable-TV service, announced Thursday that it had served up one billion VOD programs since the service debuted in 2002.
But VOD's arrival has been rendered less grand by other technologies, including digital video recorders such as TiVo. The technology also faces growing competition from video on the Internet, which is one reason Comcast is considering joining with Google Inc. to buy AOL's video-rich Internet Web site.
Video-on-demand and TiVo both let viewers watch the programs they want when they want to watch them. But TiVo and other DVRs can be easily programmed to record any program on television, allowing viewers to watch at their leisure.
Video-on-demand, by contrast, requires them to select shows from a preset menu. Granted, that menu is huge, with more than 3,500 titles on Comcast's On Demand system at any given time -- but so far, TV viewers believe it's not quite the same as building their own menus.
"People say, 'VOD is great. I like this,' " said telecommunications market analyst Josh Bernoff of Forrester Research in Cambridge, Mass. "But their reaction is not over the moon the way DVR households are."
VOD, he said, "is about watching National Geographic documentaries whenever you want. DVRs are about watching 'Desperate Housewives' whenever you want."
Folks at Comcast say that perception is miles from reality. They point out that those thousands of VOD titles include more than 200 movies, including dozens of "new releases" such as "Robots" and "Sahara."
However, new releases still show up in video stores about four to six weeks before they appear on VOD menus.
Many more movies are on the way from the MGM library that Comcast acquired in a deal with Sony Corp. last year, and under the terms of a deal that Comcast struck over the summer with the Starz premium movie channel.
What's not on VOD -- yet -- is "Desperate Housewives" or episodes of any other network TV series, with the exception of series that appear on premium channels such as HBO's "The Sopranos."
Comcast would love to show network programs, said its VOD chief, Page Thompson. But getting them on VOD is complicated by distribution agreements and worries from networks and production companies that VOD does not provide the same financial return as their existing distribution models.
A crack in that resistance may have appeared in Apple Computer Inc.'s announcement on Wednesday of an agreement with ABC to make episodes of "Desperate Housewives" and "Lost" available for viewing on the new iPod video device for $1.99 each.
Still, video-on-demand is hardly an unused technology.
It is now up and running in all the 15 million digital cable households nationwide.
People who have the service -- which requires a digital cable subscription that costs about $60 per month or more -- can choose from hundreds of movies and thousands of other programs to watch whenever they want. Most of the titles carry no extra cost.
And subscribers are ordering plenty. Comcast says customers in the Philadelphia area are ordering from 16 million to 17 million VOD titles each month. That's more than six orders per second.
New digital customers are signing up at a fast clip. Nationwide, Comcast added about 532,000 digital subscribers in the 12 months that ended June 30.
Because the library of recently released movies, which usually cost $3.99 for a 24-hour viewing window, remains small relative to video stores, they are far from the most popular titles on the menu. The most popular features by far are free titles, which can include hundreds of older movies and thousands of other shows, from music videos to home-improvement instructional videos.
Comcast surprised cable industry watchers in the early days of VOD when it decided to make the majority of offerings free. The idea, said Thompson, was to build an audience -- and hold onto it.
What has emerged from that strategy, analysts say, is a service that is more about keeping customers from defecting to satellite TV than it is about making money for cable operators.
Video-on-demand is "not a significant new source of revenue for cable companies," Bernoff said. The upside of the service for cable companies, he said, is that "people who use VOD feel that cable is worth more and are less likely to quit."
Indeed, when stating their case in the competition for customers with lower-priced satellite television, cable companies are quick to note that satellite systems can't offer VOD.
"Over the next five years we'll want to push VOD because it is something satellite can't offer," said Mike Doyle, president of Comcast Cable's Eastern Division, which runs from northern Delaware to New England.
The satellite services can offer two forms of so-called "near VOD."
One shows popular titles on multiple channels with starting times staggered every 15 minutes or so. Unlike true VOD, that method does not allow viewers to pause or rewind, or to watch the movie again -- unless they pay again.
Another automatically sends 100 or so titles to customers' digital video recorders for viewing whenever they want, with the ability to fast-forward, rewind and review.
Experts say VOD, in combination with other new technologies, may eventually threaten companies such as Blockbuster and West Coast Video. But don't throw away that rental card just yet.
"There has always been speculation that VOD will encroach on video rentals," said Brad Hackley, vice president of business development at Rentrak Corp., which tracks cable viewing habits. "But at this point in the history of VOD, it's still too early to tell if that's playing out."
He said online rental services, such as Netflix, which allow customers to rent as many movies as they like for a monthly fee, have had a bigger impact on the video stores. Online services deliver movies on DVD to the homes of subscribers, who then return them in postage-paid packages. Some video stores also are offering customers all-you-can-watch plans for a monthly fee.
"I think ... it's going to be tougher for brick-and-mortar stores to hold onto their customers in the traditional sense of a la carte rentals," Hackley said. "While the in-store subscription models are a good deal for customers, they're not delivering the same amount of revenue per customer" to the store.
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