June 30, 2004

Video-on-Demand Gains Momentum

Mark Evans, Financial Post

Thursday, July 01, 2004

Like many new consumer-oriented technologies, video-on-demand has experienced a number of growing pains. Among the challenges are getting people aware the service exists; making sure it is user-friendly; and offering consumers enough quality titles -- movies, children's shows, documentaries -- to make it attractive and, more important, worth paying for.

In Canada, Rogers Cable Inc., Videotron Ltee, Shaw Communications Inc. and Cogeco Cable Inc. have been busy over the past year or so with VOD strategies. Rogers, for example, now has more than 1,400 titles available. Many of them, however, are more filler than fulfilling, and the on-screen menu is difficult to navigate.

Rogers has made VOD, which lets people request an available title whenever they want, accessible to 1.9 million of its 3.2 million customers. It expects to have 90% of its network footprint covered by year-end.

Mike Lee, vice-president of product development, said Rogers has seen "pretty decent" pick up, with 30% to 35% of subscribers using VOD each month. "The numbers are where we expected them [to be]," he said.

"We have a pretty optimistic perspective in terms of what it would contribute to the business. If loyalty is a measure of the effectiveness of a product, 85% to 90% of the people who bought [VOD] before, bought it the next month. Like Alexander Keith's beer, people who like it, like it a lot."

Clearly, content is going to be a crucial part of VOD's success. When it comes to movies, consumers will likely be not too enthused buying something months after it has appeared in theatres and retail outlets such as Rogers Video and Blockbuster. At the same time, consumers will not settle for movies that are second-rate -- even if they are relatively new.

This explains why Rogers, et al have moved into children's programming, documentaries and television series until they can get access to first-rate movies. Videotron, for example, has been offering Star Academie -- the French version of American Idol.

The VOD market's growth could get a jump-start with the recent introduction of subscription video on demand (SVOD) service. Unlike VOD, which works on a pay-as-you-go basis and requires consumers to watch a title within a short period of time; SVOD allows users to buy a monthly subscription so they can view titles whenever they want.

Earlier this month, Rogers unveiled its first SVOD movie service with The Movie Network. Rogers' customers can choose from 40 movies at any time of the day and as many times as they want. Like a VCR or DVD player, movies can be stopped, paused, rewound, fast-forwarded, or replayed at no additional cost.

For many people, a SVOD movie service is appealing. Couples with young children, for example, will appreciate the ability to watch a movie later when they finally get a few hours of quiet time.

SVOD will really get interesting when it gives consumers the ability watch popular television shows around the clock. What would you pay to instantly access The Sopranos or Six Feet Under? This would be a popular option for people who do not want to go through the bother of taping shows, or borrowing tapes from co-workers.

For VOD service providers, SVOD of prime-time television shows would be the "holy grail". Unfortunately, it will probably be some time before this service materializes because VOD has to gain a much bigger foothold, and the financial arrangements between service and content providers needs to be worked out.

"It is hard to predict exactly how far we are away but every broadcaster group is talking to us and interested in how they can make it available on the on-demand service," said David Purdy, a senior director, digital television products with Rogers Cable. "Global, CHUM and Astral are probably the three most active with us, and the ones doing the most experimental work today."

As VOD and SVOD become more popular and the programming improves, there is little doubt it will change when and how we watch movies, documentaries and television shows. It is enough to make couch potatoes everywhere kiss their remote controls.

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