By Shirley Brady Following is an expanded version of Shirley Brady’s interview with Matt Strauss, Comcast’s VP of video on demand programming investments. Click here to read her Nov. 2004 interview with Strauss. Shirley Brady: A lot of the opportunities for start-up digital networks at Comcast these days is on VOD: specifically, on your Select on Demand lineup of virtual VOD categories. Talk about how things have changed at Comcast since you were hired to head up this effort. Matt Strauss: We are on track to achieve the billion views for video on demand that Brian Roberts spoke about earlier in the year. As each month goes on we continue to show growth in the number of views, and even in the percent of our digital subscriber base that is using this new technology. Roughly 60 to 70% of all digital subs use on demand every month. So when we look at the landscape it’s really clear that the future of television is not going to be adding channel 343 to the digital lineup, but it’s going to be to migrate more and more programming over to on demand, which really is a superior way to watch programming. Brady: And so Select on Demand was born. Strauss: Yes. The genesis of Select on Demand was that as we continue to grow the [VOD] offering and expand the offering, there is really now more than ever a crossroad in cable television where programming that was potentially too targeted to warrant being a linear network, or programming that really couldn’t work well in a linear environment, now could have a destination on TV. The benefit, as well, is that it’s a platform that all of our subscribers are going to. So the philosophy of Select on Demand was really to identify what are those areas that we can start developing and also, is there an opportunity to start partnering with other start-ups? Start-ups that may not have enough content to really warrant being a 24/7 channel because they might not have the economic backing, and start to work with them to really build what I’ve been calling the next generation of cable networks. Brady: Where are you at now in this process? Strauss: We’ve gone out and we have built, or partnered to create, 15 new virtual networks. And they’ve all launched and they’re all available as individual services. They’re all under this holding company, Select on Demand. But they’re not under the Select on Demand button; these channels reside wherever we think the audience will go. The thought is, let’s test these things, let’s continue to hone them and build upon them based on usage and based on consumer feedback, and determine which one if any of these, we can ultimately continue to build and evolve. It’s really no different to how almost every cable network started. You start primarily with packaging acquired product and then you start to build original programming into that and build brands. And that’s what we’ve been starting to do. The channels are wide: It runs from parenting to voice lessons to fitness to real estate, which we launched a few months ago as a test here in Philadelphia. What we’re finding is that niche doesn’t necessarily mean small. Several of these channels are really starting to gain some momentum from a usage point of view and we’re now in the process of really starting to increase the level of original production really for the on-demand platform. Brady: Such as the Body by Jake partnership? Strauss: Yes, our Jake deal is one of the first examples of that, where fitness was a channel that we launched on demand, we’ve continued to hone it and groom it, and it continues to do incredibly well. So we felt that the next step for this service was to start producing original programming, which is what we’ve been doing. Brady: Meaning you’re interested in setting up companies as co-ventures to produce this original programming, as you’re doing with Jake? Strauss: Where it warrants that, yes. The message there is that we’re not necessarily looking to do it all ourselves. We’re looking to partner with other creative producers and packagers of programming to really give them the opportunity to really create some interesting and unique programming for this new platform. And we think that the value that we have is we can help manage that process. And if it works on Comcast, we think there’s a benefit to even redistributing this programming to other cable operators, so they can make their on-demand platform as robust as possible, which collectively is good for the cable industry. Brady: Has any other cable operator started running any of your incubated VOD channels yet? Strauss: No. Our goal was first and foremost to develop these channels for Comcast. We have had interest from other cable operators about understanding what we’re doing and potentially making some of our programming available for their on-demand platforms as well. We think there’s a lot of virtue to that because not only do we want collectively the cable industry to have a very robust on-demand platform, but I’m a big believer that the economic model of on demand is really not going to be that different than the economic model of broadcast television. It will be sponsorship and advertising that will be underwriting most of these services. So the more subscribers and the more access to the content, we think, the better. So that directionally is one of the things that we’re really now starting to see. Now that we’ve hit a critical mass in the distribution of on demand and the penetration of digital subscribers using on demand, and with Rentrak in place now where we have a really solid reporting structure, we’re starting to aggressively explore opportunities with advertisers and sponsors to bring them to this new platform. Brady: You’ve just launched the start-up network Alpha Mom TV, which describes itself as an on-demand network as opposed to a traditional linear TV network. How does launching a start-up TV brand fit into the Select on Demand model? Strauss: Part of the philosophy of Select on Demand is that there are certain services that we’re developing internally; certain programming that we’re partnering with production companies to produce original content for us, that is being underwritten in part by us and part through advertising. And then we’re partnering with start-ups, where it’s their brand, it’s their service, we’re just helping to manage them. So Alpha Mom is an example of that. So I’m calling them "channels" loosely, but I’m thinking of them more as branded destinations. Parenting is an example where we’ve created this parenting destination, which will be comprised of programming we’ve acquired, programming we’ve produced and programming from our partners. There’s a benefit to our subscribers of really creating these kinds of destinations where they can get access to a variety of programming, all packaged within a similar genre. That’s a similar philosophy as to what we’ve done with Wheels and Wings, which is another of our channels or branded destinations where it’s original programming, programming we’ve acquired, and we’ve also been working with WheelsTV where they’re also under that umbrella. In that sense, we think it gives everyone the benefit of really trying to make this as robust as possible, but also gives us the flexibility in being able to add more and more services under these destinations. Brady: So Alpha Mom TV has its own category and brand under the Comcast on Demand menu, or is their content filed under the parenting category, for instance? Strauss: Actually, they have their own button. In part, we’re trying to create these destinations, but in part we’re also trying to grow these new brands. And Alpha Mom is a brand that we are working with to help them manage the continued growth and development of their service. Part of the Select model is we’re a holding company, and we expect to be managing multiple start-ups in hoping to grow their brands and services for on demand, in addition to services that we will be developing ourselves internally. Brady: I’ve been talking to a lot of digital networks to get a sense of the landscape currently, and what I’m hearing is that it’s tougher than ever: Some have folded, some are retooling their strategies or retrenching, some are doing telco and mobile deals but not getting much traction with cable operators. And there is a lot of trepidation out there among start-up networks about what you’re doing, specifically, with Select on Demand—that your branded categories are competing with them. One example is your Anime Selects channel versus the Anime Network, an independent network that is still trying to get a linear channel launch with Comcast. Strauss: It’s actually the opposite. Let me give you an example of what I mean. If you were to go to on demand a year ago, if you were a start-up channel, a lot of the challenge was just where would you go in the menu? There really wasn’t a place for you that fit, you were an unknown brand, you might have had very little experience in understanding how do you program for on demand, it’s not the same, obviously, as how you program for linear. How do you market this; how do we brand it? And the other big challenge for a start-up is that not very many of them have a big library yet of programming, they may only have a small library of content that they want to use to get started. So really what I’ve tried to do, if you follow this notion of branded destinations, is to create places on on demand where these new start-ups could live. And the thought is that, if I create Wheels and Wings, I’ve created this destination now for car enthusiasts, which is more robust than any one service unto its own. And I’ve created it using content we’ve acquired and we’ve produced, and now it’s a destination for other car [network] start-ups to ultimately reside under and I think has more chance for success in the on-demand landscape, and by working with these start-ups we think that we can help give them a better chance for success. So our objective is not to shut people out of the opportunity, but actually to empower programmers to take advantage of this crossroad in time and give them the best chance of success. Brady: But how do viewers distinguish your acquired automotive programming, for instance, from what Wheels TV is providing? Do they get some kind of on-screen bug or any opportunity to brand and own their programming? Strauss: Yes. If you look at the Wheels TV programming, there’s actually a Wheels TV brand and some of their programming includes a call to action to their website which talks more about Wheels TV. I’m creating the mall, and I’m now trying to fill up the stores. Some of those stores will be content that I’ve created and produced, and other stores could be through partnerships that we’ve developed. But what didn’t exist a year ago was the mall. And that’s really what we’re trying to achieve here with Select. That said, a lot of what we’re doing here is development, so just because we’ve created these channels doesn’t mean that we have the ability at the moment to just take every single piece of content that’s given to us. So we’re very selective about wanting to get the best programming and want to partner with programmers that have the best strategy and partnering with what we think will be the next generation of these networks. It’s still very much a selective process, which is why we’re calling it Select on Demand. Brady: What start-up networks are you partnering with? I’m aware of Players Network programming some of your Casino channel, Alpha Mom and Wheels TV we talked about. Strauss: Players Network definitely, Wheels TV, Alpha Mom. I’ll need to double check because I don’t want to leave anybody out. A lot of what we’ve been building over the last year is—because you’ve got to crawl before you walk—just building these destinations and demonstrating that there is a demand for this kind of programming. And now that we’ve done that, it’s formulating these partnerships with some of these start-ups, where we think that now, more than ever, there’s an opportunity for them to succeed on this platform. And if we can get them to succeed and curate them on Comcast, then we would also look to take them out to the rest of the cable industry. Brady: Is it still your goal to launch 40 Select on Demand channels by the end of this year? Strauss: We’ve got a few categories in development, but we’re not so focused on hitting a number, quite honestly. We’ve done dozens of deals to get to the point where we are today. A lot of it is identifying what we think is a good opportunity and moving forward in that direction, and that’s really what’s driving us. So I don’t really have a target number to give you other than to say that at any given time there is something like five or six new channels in development. Brady: Is the challenge to doing more been in finding good content? Strauss: There hasn’t been a challenge in finding good content. In part, the challenge initially was finding programmers who were really focused in developing for On Demand. Historically, most programmers had been focusing on linear distribution. And we’re now starting to see more programmers really recognize the huge opportunity with On Demand and that that really is the future. It benefits them that the on-demand platform actually exists. So because of that we’re able to move much more quickly, and the risk and the exposure on both sides is significantly lower. So our list is long, and I could name 50 categories that I think warrant being on on demand, and we are in active development. Some of them are moving in the direction of Dating on Demand and Real Estate on Demand, which are really cross-platform services: content that’s really made for the [VOD] platform and has the benefit and the value of being on both VOD and broadband. So we have several other ideas in that direction. Brady: So in your view the smart digital network today is thinking VOD first, and not as an afterthought or as a grudging adjunct to its real dream of launching a linear channel? Strauss: Yes. That’s phenomenally expensive and the economics of launching and creating a linear channel today are more challenged than at any other time. If you believe that the future of television is going to be on demand, for a significantly lower investment you have this opportunity today to reach millions of digital subscribers on a platform that’s quickly approaching a point where there’s going to be more people watching on demand, and the ratings for on demand will be higher than some cable networks. So we’re starting to see more of a migration where programmers are seeing on demand not as this place where you go if you can’t get a linear deal, but as actually a place where you want to be. A lot of our enthusiasm about on demand, and about programming for on demand, isn’t so much that there’s bandwidth constraints on launching more linear channels, it’s because we actually know and believe that on demand’s a better viewing experience and platform, especially for new forms of content. So that’s why we’re putting so much effort and investment into on demand. There’s nothing that ever really precludes an on-demand service from evolving into a linear channel. If you look at the bigger picture, at some point it’s all just going to merge anyway. There’s really nothing that will one day from a viewer’s point of view they’re thinking that they’re watching a linear channel, but it very well might be a video-on-demand stream assigned a channel number. What’s the difference? Ultimately, there’s going to be that kind of merging. The opportunity now is to really embrace the on-demand platform and take advantage of it, especially now while it’s still relatively young. Brady: Are you sensitive to existing start-up digital networks that might occupy the very niche that you’re looking to launch? Strauss: We’re not so focused on re-creating what others are doing very well, or that’s already there. A lot of the categories we’re going after are what we think is being underserved on TV, or there’s a unique way to do it differently for on demand. For example, with cooking, we have a service we’ve created called Cooking Class. Now there’s plenty of cooking programming on TV right now—really good, high-quality programming—but we thought there was an opportunity to create a service really geared for on demand. So the person who comes home and says, "I don’t know what to make for dinner and I need to make something in 15 minutes," can check out this original series we’ve created with Banyan Productions called Fifteen and Done, which integrates all the pause, rewind and fast-forward elements of on demand directly into the content, so it’s more of a utility. So you can come home, go to on demand and check out which recipe you want to make for dinner. That kind of programming fills a niche, which is why we decided to create that kind of a series. We’re not looking to replicate what’s already there on television, we’re really looking to fill in the holes and experiment and develop what isn’t there. Brady: So in addition to the utility aspect, the kind of programming that doesn’t really lend itself to a linear channel because it’s something you need when you want it. Strauss: Right. Just like exercise: Not only do you want to work out when you want to work out, you want to choose what kind of workout you want to do, be it yoga, pilates, cardio. So it’s not that there’s an under-abundance of fitness content on TV, but creating a fitness service that’s geared for the on-demand environment is something that we think makes a lot of sense.

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