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Cable Operators

Programmers Sink Their Teeth Into On Demand

8/25/2006 8:05 PM Eastern

With so many options including Apple Inc.’s iTunes, Google Video, cable on-demand services and even companion Web sites, your typical television programmer has some complex decisions to make as to where and when to release hit shows after they first run on TV.

Until now, there has been a concern that largely free cable video-on-demand services have been pushed toward the back of that release line, unable to compete against the revenue that a $1.99 iTunes download offers. But with rising VOD viewership and a more sophisticated way to marry advertising to on-demand fare now coming into play, that situation may be changing — perhaps as soon as the fall TV season.

TVN Entertainment Corp. sees the trends in its business, which now includes delivering on-demand fare for 120 networks and content providers totaling some 3,000 hours of video a month. That’s up from the 2,500 hours of monthly content it delivered last year, and the numbers will probably jump again this year, according to TVN chief operating officer Doug Sylvester.

“We’re seeing a real step up this year, in that there are long time programmers that have made a portion of their programming available for VOD, but it might be 10 to 20 hours per month — and now we are seeing a wholesale increase in the range of going from that to 500 to 100 hours per month.”

Why? Sylvester points to programmers wanting to lock in their place aboard on-demand servers, and maintain a market lead. The improvements in VOD technology that will allow advertising spots to be updated within programming content — and the increased attractiveness of that for advertisers — also comes into play, he said.

All of that is backed up by the ramping numbers for VOD usage, and the fact that these services are now reaching a critical mass of customers in large cable systems such as Time Warner Cable and Comcast Corp.

Comcast On Demand now offers more than 7,500 titles and has served up more than 2.7 billion views — defined as individual titles sent to a customer — since January 2004.

“The addressable market is substantial now [and] advertising is emerging as an important reality now,” said Sylvester, adding, “you can deliver more time-sensitive programming within hours of broadcast.”

For sports programmer ESPN, the issue is far from one or the other in distributing its content to Internet versus cable VOD. It wants a presence on both platforms, but that doesn’t mean it delivers the same content to both services, according to ESPN broadband general manager Tanya Van Court.

For example, the network’s City Slam series of slam-dunk tournaments and content from the recent summer X Games featuring alternative extreme sports has been a big hit on iTunes — due in part to the fact that it attracts a younger demographic that is also a big part of the iPod generation.

“You are really going to get a bunch of young, X Games enthusiasts who are excited about that content, and it’s great to have it on the iTunes platform,” Van Court said.

Meanwhile, ESPN’s on-demand fare often features some of the same titles, it is also focusing more long-format videos such as full-length movies on those services that might not play as well on a handheld device. So while the full-length version of the year’s Rose Bowl game might appear on a VOD, a concentrated, highlight-centric version might show up on iTunes.

“So it is very interesting to explore each of these platforms and see what works, but we have seen that condensed versions of live events work well on iTunes, and in some instances on video on demand, longer form content works as well,” Van Court said. “It really is a combination, and I think that we’re exploring each of these platforms and just figuring out as we go along what is resonating with consumers.”

Discovery Networks, meanwhile, is taking a slightly different tack, opting to offer similar content to on-demand and iTunes — and in many cases, on-demand often gets that content first.

“For us, we are working with our cable operator partners on a lot of fronts and we have longstanding relationships with them, and we want to help them grow their business,” said Clint Stinchcomb, senior vice president of new media operations at Discovery Networks. “With 14 networks out there, every additional customer is good for us, and it’s good for them. A subscription business is historically a better long-term business than a pay-per download.”

As with ESPN, Discovery Networks does provide a lot of short-form content to iTunes and podcast Web sites as a means of promotion, such as free podcasts from its Miami Ink series profiling a tattoo shop and its artists. But it also provides short-form content to on-demand services. For example, during Discovery’s “Shark Week” in August, the programmer provided several eight- to 10-minute short form versions of a Mythbusters episode debunking shark myths to Comcast On Demand.

“Your shorter form content can be a little longer than the typical two- to three-minute clip,” Stinchcomb noted. “It was a great way to help Comcast promote their VOD platform and a great way to promote Shark Week.”

There is download revenue to be had from iTunes, but in fielding content between on-demand and download services “it all works together,” Stinchcomb said. “It’s not a zero-sum game. Any promotional noise in the marketplace is good for our cable operator partners and good for us as well.”

Business issues also play into the decision-making for cable programmers. ESPN must strike deals and work with multiple cable operators to provide on-demand content, and in contrast it can look primarily to iTunes — the overwhelming leader among online download services — for Web content distribution. Nevertheless, ESPN is talking to a number of cable providers about providing more on-demand sports content.

“We know that on-demand is important to a number of our affiliate partners out there, and I think you’ll see some things shortly in that space,” Van Court said, adding that does involve multiple deals “versus one on iTunes.”

Discovery, meanwhile, has been a staunch VOD booster all along, and viewers can expect to see more episode premiers, short-form “V-sodes,” and director’s cut shows among Discovery’s on-demand offerings, Stinchcomb said.

On-demand may get an even bigger boost with the advent of better ad-insertion systems that can swap in new ads attached to stored on-demand video and audience measurement systems that can provide accurate data on exactly what viewers are watching on demand, he noted. That could well transform on-demand content from a promotional tool for linear TV to a legitimate ad revenue generator in its own right.

“The magic of on demand is you will be able to get perfect information ultimately,” Stinchcomb said. “So you combine dynamic ad insertion with full-fledged measurement, and it’s off to the races.”

With that, other programmers may increase their on-demand content offerings, and TVN is seeing moves in that direction. While no deals have yet been announced, Sylvester said one can expect that the fall television season will bring a boom to on-demand content, and it expects that in the next six to nine months its volume of monthly on-demand programming delivered will rise to 4,000 hours.

“Up until now we haven’t seen the full range of broadcast window programming — daytime, primetime and late night,” Sylvester said. “I think you are going to see some announcements soon that will change that.”

September