Comcast Cable president Steve Burke missed the finale of The Sopranos June 6 because of his travel schedule, so he—as more and more of his customers are doing in such cases—watched it the next night on HBO On Demand. Page Thompson, Comcast’s VP of marketing for new video products, attributes the success of premium programming on demand to the increasing amount of free content on demand the company offers. "The more free product we add, the more our buy rate on movies goes up," Thompson says. "The customer becomes familiar with how the content works by using the free product." That trend is evident in Comcast’s most mature VOD market, its hometown Philadelphia system. In April, more than 70% of Comcast’s set-top boxes had been used for on demand during the previous 90 days, and the usage is growing every month, Thompson says. Comcast’s VOD savvy is boosting the company’s DVR results; and on-demand usage tends to be higher in homes that have a DVR, Thompson says. "The two together are proving to be a complementary experience that satellite can never match," he adds. Philadelphia is the company’s first market to offer local programming such as news and sports as free-on-demand content (recently joined by New England). "Our local programming reminds people that cable has a tremendous advantage over what satellite offers," says Thompson. "During the recent Philadelphia Flyers playoffs our VOD usage rose steadily with every game that we offered." Adding more unique and exclusive-to-VOD free content (the company includes VOD rights in every new content contract, such as its recent Viacom deal) will drive the overall success of the offering, Thompson says. Comcast’s EVP of programming Matt Bond and EVP of programming investments Amy Banse are pushing for more virtual channels of exclusive free VOD content (see "Attention New Networks!" June 21 issue), expanding the company’s so-called "Phillyvision" three-bucket model of free VOD, subscription VOD and movies. Now there’s a fourth bucket: exclusive nonlinear content. "That fourth category helps differentiate us from satellite," Thompson says. "If a programmer is interested in providing content to a cable company, it’s a great opportunity for them to show the appeal of their brand." Comcast already offers exclusive-to-VOD content from Anime Network and short films from AtomFilms, plus movie previews, music videos and concerts—a free-on-demand lineup that Thompson says is "just the tip of the iceberg" as the company prepares to increase its VOD programming from 2,000 to 10,000 hours within two years. Now that it’s promised to start paying programmers for their exclusive-to-VOD content—which has not been the case to date—Comcast is exploring models for incremental revenue including VOD advertising, an effort being spearheaded by Warren Schlichting, VP for new business strategy at the company’s Comcast Spotlight ad sales arm. At this early stage in VOD’s growth, Schlichting sees free VOD content having particular benefits for local advertisers. "The niche content on VOD opens up a whole new opportunity for local advertising, particularly on the sponsorship side," Schlichting says. "It also gives them the ability to work outside of the 30-second spot." Local advertisers such as KFC in Philadelphia and BlueCare, a division of Blue Cross, already have sponsored music videos within Spotlight On Demand, the ad-supported VOD category within Comcast On Demand that last month expanded from Philadelphia to all Comcast VOD markets. Spotlight On Demand offers content such as PSAs—just one of the ways to engage digital customers with ads on demand. "Spotlight VOD makes a nice umbrella for everything we’re doing in advertising," says Schlichting, adding that the mix of PSAs, movie trailers and sponsored long-form content creates a stickiness for digital subscribers. "It’s a nice place where we can play with ad-supported VOD. Right now we’re just letting the offering grow organically, but you can see where it could go in the future with, for instance, offering 100 how-to videos that could be sponsored." Thompson says that he’s seeing tremendous interest in on-demand advertising from blue-chip companies such as General Motors that already are advertising with Comcast. "Everybody realizes there’s tremendous potential for on demand to put a longer-form advertising message in front of customers who want to see it. It’s a great vehicle for targeting, and a tremendous opportunity for advertisers who want to take advantage of our platform." He points to Comcast’s current test in its backyard of high-definition VOD programming as another critical step in winning the battle against its competition. "It’s all about what we can do to differentiate ourselves from satellite, so for that reason HD VOD is very important to us," Thompson says. "What it’s all about is providing better value for our digital subscribers, and over the next 12 months to two years we have some major initiatives coming that will further drive home the point that the cable industry’s on-demand platform offers unparalleled choice, convenience and control for the customer."

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