Cable Operators

Smaller Players Find VOD In High Demand

7/26/2010 12:01 AM Eastern

In an increasingly on-demand
world, smaller cable operators are
being forced to pick up the pace
on VOD to meet their customers’
desire for instant gratification.
But that can be a challenge,
as independent players may lack
the resources of their bigger
brethren.

Clearly, video on demand is
now a crucial tool for small and
midsize cablers to fight satellite
and telco TV competitors. “VOD
has become a table-stakes service
that all cable operators need
to offer,” said Joe Matarese, vice
president and general manager
of Arris’s On Demand Business
group.

Independent operators want
to bulk up VOD services to stay
ahead of viewer demand, looking
to add more HD titles, more
day-and-date movie releases and,
eventually, even 3DTV content.

Antietam Cable Television, a
midsize operator based in Hagerstown,
Md., has increased its
video-on-demand storage and
streaming capacity fourfold in
the last few months under president
and general manager Brian
Lynch. Before he joined the
operator in January, Lynch spent
18 years with Comcast, most recently
as general manager of the
MSO’s Baltimore system.

‘TERRIBLY IMPORTANT’

“VOD is terribly important to our
business,” Lynch said. “But when
I got here, we hadn’t quite had a
focus on VOD in general.”

Antietam Cable currently offers
5,000 VOD assets and is shooting
to hit 7,000 by year-end. That
would put the operator above the
industry norm: In 2009, North
American cable operators offered
an average of about 6,700 movies
and TV programs, according to
research firm SNL Kagan.

Moreover, Lynch said, the operator
can get to the 10,000 mark
without a major upgrade to its
VOD infrastructure, which is
based on SeaChange International
software and equipment.

Part of Lynch’s aim in loading
up on VOD is to boost digital penetration,
which will let Antietam
free up bandwidth for other advanced
services like DOCSIS 3.0
high-speed Internet and more
linear HD channels.

“In my mind, VOD is a bridge
to the digital space,” he said. “Our
goal is to get to a certain tipping
point on digital penetration. Ultimately
we want an all-digital
play.”

Antietam Cable has fewer than
40,000 subscribers, of which
around one-third take digital cable.
Lynch has set a target of 60%
digital penetration by the end of
2011.

For Sunflower Broadband, a
30,000-subscriber operator in
Lawrence, Kan., the priority is
to keep pushing more VOD titles
and, in particular, more HD.
In addition to satellite competitors,
Sunflower is facing AT&T’s
U-verse TV expansion in its footprint.

The operator has filled 17 out
of 21 Terabytes of its SeaChange
VOD storage, representing more
than 6,000 assets and about 5,000
hours of video. Sunflower just put
in an order for more storage —
to provide another 5,000 hours,
programming manager Andrea
Pritchard said.

“We have more plans to grow
the content, and I do think HD is
going to be a priority,” Pritchard
said. Sunflower presently offers
500 HD on-demand choices.

For independent operators, another
big part of the VOD play is
adding localized content, such as
high school sporting events, political
coverage and ethnic programming,
said Brian Matthews,
chief marketing officer for Avail-
TVN, a VOD and programming
aggregator.

“They’re more of the fabric
of the community” than larger
MSOs may be, Matthews said.

UPGRADES REQUIRED

Still, Arris’s Matarese said, many
smaller operators are just in the
early stages of getting their arms
around VOD compared with larger
MSOs. One of the issues is that
operators have to make the commitment
to upgrade their plant to
be fully two-way capable.

“It takes a little bit to understand
what’s going to be involved,”
he said.

Arris has been working with
Comcast Media Center to offer
the turnkey “VOD in a Box” service
that provides equipment,
management and content rolled
into one. The service, targeted
at systems with between 10,000
and 20,000 subscribers, has a customer
base in the “double digits,”
Matarese noted —“but there are
triple digits of potential customers
out there.”

Jon Shaver, Comcast Media
Center director of content development,
agreed that selling VOD
solutions to smaller independent
operators has been “a little tougher
hill to climb.”

More aggressive operators are
deploying traditional VOD solutions,
while the managed VOD in
a Box solution can provide up to
2,000 hours of video to help cable
providers get up and running
with a credible offering.

“Once you start to scale above
2,000 hours, there’s a stronger
economic argument for an in-house
VOD solution,” Shaver
said.

And everyone wants to add
more content.

Smaller operators that offer
1,000 to 2,000 hours are “aspiring”
to 3,000 to 5,000 hours, Matthews
said. By hitting the 5,000-hour
milestone, “that brings them to
par with or differentiates them
from their competition,” he said.

In some cases, an independent
operator finds its VOD lineup
being compared to that of a
larger cable operator in an adjacent
market. “They have to match
what the big guys have because
their customers are exposed to
the same marketing messages,”
said Sanjiv Moré, SeaChange senior
director of advanced advertising
and VOD sales.

SeaChange offers a turnkey
solution aimed at operators with
fewer than 20,000 subscribers,
called VOD Now, in conjunction
with Avail-TVN. The smallest
operators are looking for their
vendors “to hold their hand a lot
more,” Moré said. “They’re a little
more reactive than proactive.
And those customers continue to
come forward, but the economy’s
been tough on these little guys.”

That said, smaller operators
are interested in exploiting newer
VOD technologies and business
models.

EAGER TO ADD ADS

Advanced advertising, to be able
to add dynamic VOD ad insertion,
has garnered a lot of interest
among smaller and midsize
cablers, Moré said. “They’re already
running traditional local
spot sales and they could easily
add VOD ads to the inventory
mix,” he said.

Smaller operators are also actively
exploring “TV Everywhere”
concepts, to deliver on-demand
content to PCs and mobile devices,
much as the major MSOs are.

“I think the big piece is going
to be online on-demand,”
said Jaime Montes, video product
manager at SureWest Communications.
“That’s going to be
cool. And we could charge a couple
of dollars per month to watch
TV Everywhere online.” SureWest
has 58,600 video subscribers in
two clusters in Sacramento, Calif.,
and Kansas City.

But there remain disadvantages
to being a little guy. For
Antietam Cable’s Lynch, perhaps
the biggest challenge has
been obtaining the content itself
— an issue he had not encountered
at Comcast.

“One of the things I was surprised
by was, one of the main
programmers wasn’t giving us
all the [VOD] content I think they
should have been offering,” he
said, declining to identify the
programmer. “They said, ‘You’re
on the B package for on-demand.
But if you take this channel we’ll
put you on the A package.’ ”

September