Cable Operators

VOD’s Cheerleader in Chief

12/12/2004 7:00 PM Eastern

Comcast Corp. chairman and CEO Brian Roberts proselytizes about video on demand because he sees it as a rallying point — and an invaluable weapon — in cable’s war against direct-broadcast satellite providers.

“Why wouldn’t you want to differentiate your product from your competitor?” he asks.

Roberts and his MSO, the nation’s biggest with 21.5 million subscribers, have been cable’s most vocal proponents of VOD — particularly free VOD, the business model that Comcast has adopted.

That’s why Roberts has been bestowed with this year’s Multichannel News Image Maker award for championing Comcast’s VOD crusade. On-demand services were the MSO’s top priority this year.

SLOW BANDWAGON

Not every cable operator has jumped onto the VOD bandwagon with Comcast’s enthusiasm and gusto.

Cox Communications Inc., for example, has focused on telephone service and bundling. And at least initially, Time Warner Cable has seemingly embraced a pay VOD model.

And Comcast’s free VOD offering has been a sore point with some programmers. Networks have balked at providing Comcast with on-demand content without compensation.

But Roberts sees the networks, and eventually his fellow cable operators, coming around. That’s because he views VOD as a vital trump card DBS doesn’t have.

“Not every operator is ever going to do the same thing,” Roberts said. “But in the end, we’re all facing common competition that is national. And the more the industry can have successful common techniques to differentiate ourselves in the eyes of our customers, the more we can advertise that nationally, the more effective we can be.

“So certainly, it would be nice if the industry rallies around common strategies. And we hope using the two-way network, which satellite doesn’t have, is a logical way.”

VOD is a winner because it gives cable subscribers the kind “personalized” TV options and flexibility that they’ve grown accustomed to from the Internet, according to Roberts. He cites a tenet that was ingrained in him by his father, Comcast founder Ralph Roberts.

“And I think it’s as true today as ever, [which] is choice sells,” he said. “More choice sells better, and you’re giving more choices, and that’s what the customer has wanted.”

Industry-leading Comcast has not only made headway in terms of gaining content for its VOD platform this year, but it’s also seen its faith in the offering confirmed as customer usage has zoomed.

Comcast’s monthly VOD downloads have multiplied from 20 million orders a month at the start of the year to 58 million in October. And they’re expected to reach 60 million by year-end, according to Roberts.

The internal goal for next year is “at least a billion sessions,” he said.

Roberts also attributes Comcast’s continued gains in deploying digital boxes to VOD. The MSO had projected it would gain from 700,000 to 1 million digital subscribers this year, and the actual number will be at the high end of that range.

“On demand is powering our increase,” Roberts said. “Every quarter this year, we have sold more digital boxes than we did last year in the same quarter, yet it’s a nearly decade-old product.

“Why is it suddenly getting hot? It has to be part of the on-demand features that you now get in the digital box.”

Comcast’s argument to programmers is that they also benefit by participating in VOD, by using it as a promotional tool to build their brands.

“The viewer is going to be in control of being able to record and rebroadcast, and pick what they want,” Roberts said. “So we’ve said to the content companies, 'You should accelerate that and look at it as a marketing opportunity to display your products more easily.’ ”

This year has been a watershed for Comcast in terms of its ability to obtain VOD content in cable’s four dominant programming categories — sports, news, movies and children’s programming, according to Roberts. For example, the MSO now has deals to offer game highlights from the National Football League and the National Basketball Association on VOD. It’s also offering on-demand news content from NBC and CBS.

Early next year Comcast will start offering movies and TV series from the Sony Pictures Entertainment and Metro-Goldwyn-Mayer Inc. libraries on VOD. The MSO’s first VOD movie-studio deal was an offshoot of its participation in a Sony Corp.-led group that agreed to buy MGM for $4.9 billon.

On the kids’ front, Comcast unveiled its plans to launch a 24-hour preschool network that will also include on-demand children’s content.

IMAGE ON RISE?

With all of cable’s technological bells and whistles, is its image better today than it was five years ago?

“The frustrated answer is that it’s not universally better, yet it should be,” Roberts said. “We’ve all worked very hard on customer service. We’ve worked very hard on new products.

“For the most part, I would say, [the] image is better. But certainly, when you have really tenacious competition, who degrade the quality of your work from time to time, that’s not helpful. … Like many, I’m frustrated we still are in an inherently difficult business of charging for television.”

VOD can play a role in improving the public’s perception of cable, according to Roberts, just as high-speed data did.

“Our customers absolutely love high-speed data and in the homes that have it, they completely rethink of Comcast not just as television, but as a company that is technologically progressive and fantastic,” he said.

“On-demand appears to have the same potential. You just get people to fall in love all over again on why they have cable.”

September