The old adage that 90% of life is just showing up seems to apply to subscription video on demand. Unfortunately, subs may not know where they’re supposed to be going. As Karen Flischel, GM of fledgling gay and lesbian network here! TV, said during our recent roundtable on SVOD, "The No. 1 thing we hear from e-mails is `I can’t find you.’" And marketing, digital rights management, managing server capacity and scaling on-demand systems can’t be ignored. To assess the state of subscription VOD, CableWORLD arranged a roundtable with: Jerry Maglio, EVP, marketing and on demand, Starz; Mark Greenberg, EVP, programming, Showtime; Bernadette Aulestia, VP, affiliate marketing, HBO; Page Thompson, VP and GM, Comcast On Demand; Melani Griffith, VP, programming, Insight; and here! TV’s Karen Flischel. SVOD Business Models CableWORLD: Insight dismantled two of its SVOD offerings in April and incorporated them into free on demand. Are you seeing any difference in the number of streams requested? Melani Griffith: Some of that content, yes. I don’t have those exact numbers in front of me, but there has definitely been an increase in our free on demand as a result of the switch. One of the SVOD products was a kid’s product and that has become very popular in our free-on-demand offering. The SVOD packages that we dismantled weren’t getting the kind of penetration that we were looking for. We’re rethinking our on-demand strategy, and since I’ve come on board [in January 2005] I’ve been focusing on creating a more robust free-on-demand offering. CW: A question asked about VOD applies here, too. Does there need to be a standard business model for SVOD? Bernadette Aulestia: That’s definitely something [HBO] leaves up to the operators. We have seen success stories on both sides, whether including SVOD in the price of the premium channel or offering it separately, a la carte. Page Thompson: [At Comcast] we have premium networks, which for us are really about enhancing the sense of value that subscribers have when they get HBO, Showtime or Starz. That’s why we offer all that content to them at no additional charge. That’s different from what I would call our true SVOD, which has no linear component—such as The Howard Stern Show. (The show will be available through In Demand as an SVOD package for about $10 per month.) What makes Howard so perfect for this is that the content is original, it doesn’t air on any linear network, it can’t be recorded with a DVR and he has a built-in strong audience that he can market to. Griffith: The networks we feel will be very successful in SVOD are those that can market themselves. Not only will they have a built-in audience, they have a built-in marketing machine that allows them to speak to those customers. Guides and On-Demand Interfaces CW: Programmers really want more effective and user-friendly guides and on-demand interfaces. Thompson: I think the predominant need is for improved search functionality in the user interface. When we have integrated search functions they will make the experience a lot better for all of our customers. We’re also trying to do more on the promotional side with our iGuide video-rich navigation that we’ll be testing soon. That will do a better job of promoting the content that’s available. CW: Should programmers have to pay for branding space on the guide or on-demand interface? Karen Flischel: The No. 1 thing that we hear from e-mails and research is `I can’t find you; I don’t know how to find these titles.’ We’re not dependent on a linear model, so our need is to create some branding at the point of purchase, as they call it. That branding would be a useful, very helpful thing and mutually beneficial to our cable partners—everybody makes money when consumers order our services. Driving Subs to Content CW: What’s your most effective medium to drive people to your content? Flischel: Grassroots efforts have been our most effective tools. We have been going out market by market working with the cable systems in those markets—at the local Pride events in June, at gay and lesbian film festivals. We also do a lot of targeted advertising in gay publications on a local level. Mark Greenberg: For [Showtime], it’s a combination of things. We’ve partnered with our clients, who are doing a lot of cross-promotions themselves, which is always effective. We’re trying to create more sampling—we’ve done things with our friends at Comcast in the free-on-demand space to get to a wider audience to show them samples of available content. The other part that’s becoming increasingly important is the Internet, and our ability to reach out to the growing base of registered users on our website. Thompson: For us, probably, the most effective way to promote on-demand content is our on-demand barker. We’ve had over 100 million views for on-demand content every month. And everyone who goes to on demand is exposed to our barker. When we feature content in the barker we almost always see the usage double or triple. Jerry Maglio: At Starz we’ve made a total commitment to on demand because we know that’s what the operators are looking to do to present themselves as a differentiated and successful competitor. When we saw the SVOD opportunity arise we had a fork in the road. We could either just start taking some of the content and putting it out on servers and fulfill the requests people had, or we could take a whole different approach and attitude. We started doing a litany of things, like premiering all our theatrical output on Starz On Demand an average of nine to 15 days before the linear debut. And we started putting on shorts, we started putting on movies that will never appear on our linear service, we started using hosts. Griffith: Don’t forget the Bunnies (animated short film parodies). Maglio: And the Bunnies—we’ve had millions of hits on the Bunnies already. We’re taking up the challenge internally of trying to redefine ourselves in an on-demand world. What we’ve done to create that marketing machine is create a totally separate feed for our Starz On Demand affiliates so we could really talk to them and reach out to them and give them the messages that we think they would appreciate. We keep a separate feed for those affiliates that don’t yet have on-demand service, and for the DBS crowd. CW: Comcast wants to boost digital penetration by giving customers lower-cost digital boxes and testing low-cost digital packages. How will those initiatives influence SVOD numbers? Thompson: It will greatly increase them. We’re going to have many more customers that will have access to on demand, and we think that’s exciting, because all of our numbers show that on demand reduced churn for our digital customers and for our premium partners. SVOD, Theatrical Releases and Linear Viewing CW: Putting Starz theatrical releases out on subscription on demand first is a neat marketing tool. How has that influenced linear viewing? Maglio: We’re early on; we expect the linear viewing to decrease slightly and Nielsen, as you know, doesn’t measure premium usage. But we take the broader view of how we can help consumers enjoy Starz in any way that they prefer. And if that satisfies a customer more and helps the operator to reduce churn, then we think we’re doing the right thing. New Revenue Streams From SVOD CW: What new revenue streams will come from SVOD? Thompson: At Comcast our focus is really on the type of content I discussed earlier—original nonlinear content that has been directly marketed by the provider to a very enthusiastic audience. Maglio: For Starz that would be the introduction of Encore On Demand, which we are teeing up right now for Comcast. CW: Are we going to see hi-def in the subscription on-demand service? Thompson: We have HD available now in all of our SeaChange systems, which are the majority of our systems offering paid movie content. And we expect to have HD on our Concurrent systems by the end of the year and to offer paid movies everywhere and a limited amount of free content in HD as well. CW: Including subscription movie services on demand? Thompson: Not initially, but down the road that is certainly something we would be interested in doing. Managing Capacity CW: That leads to the question of how you manage storage space and server capacity. Thompson: With HD the issue is not simply storage space, but also the potential impact on contention, [or the number of streams that can be in use at one time.] You have to design your system with sufficient capacity to handle all that. We’re planning out what our Comcast On Demand system will look like in the future so it’s easily scalable. Griffith: At Insight we’re trying not to lock ourselves into very, very long agreements. We’re also incorporating our ability to measure views into how long an agreement is if we’re going to maintain content on our server. If there’s great interest it’s certainly worth server capacity. Maglio: From a programming standpoint, we feel we have to earn our way to have the opportunity to have more storage space devoted to our service. We get a look at the numbers just like the distributors do. And if we can create a compelling story because viewers continue to come back and view, then it creates an argument that we might be able to have more storage space down the line. Digital Rights Management and Piracy CW: Questions over digital rights management are one reason studios are hesitant to shorten on-demand content windows. What do operators and programmers have to do to protect digital rights? Greenberg: This question becomes more complicated when you look at the device that’s receiving it. There are copy protection issues, which are important, our intellectual properties on original programming in particular but also the rights of our [studio partners], which we have to protect. CW: Yet there are many Internet sites where users can download pretty much any show on television. Greenberg: We do a lot within Viacom to police that effort. We have gone after a lot of those sites. If everyone is giving it away, then everyone on this phone call is out of business. Maglio: We’ve had to look that one square in the eye, too. As we’ve extended to another platform, which is our Starz Ticket product on broadband, we did everything we could to ensure we have the right digital management software protections in place, or we wouldn’t have had the ability to offer that product. No one has broken it yet, and we’re going to continue to keep it that way to the best of our ability. That’s key to having any business opportunity, or, Mark’s right—we’ll be Napsterized. CW: Is it possible to stay ahead of the pirates? Aulestia: This is a challenge that we all face. Our CTO will tell you there isn’t a way to always be 100% in front. But those people represent a small portion of the population. So if you can build legitimate businesses and means by which the mass population can gain access, then you have won half the battle. The Future CW: What will we be talking about a year or two from now? Flischel: More usage, more familiarity, more appreciation and value for what SVOD offers. Our research shows that it’s still quite confusing for people. Greenberg: I agree with Karen. Eventually consumer confusion will diminish, the user interface will be better, utilization will be better. Thompson: You’ll see much more integration of the linear and on-demand product. You’ll also start to see increasing production of original content such as alternate endings or scenes, or new content that is produced for on demand. Overall it will be easier to find content through better user interfaces. Finally I think you’ll see the evolution of several targeted SVOD offerings along the lines of a here! or a Howard Stern. Griffith: We’ll be thinking more about how to integrate more advertising in all VOD platforms. Maglio: Right now consumers basically pick their favorite six to eight channels. In the future there’s going to be an equivalent of their favorite buttons in whatever the interfaces are. We tend to view it as the "battle of the buttons," because like a radio preset, most of the viewing that gets done by individuals is based on what they’re most aware of. We see that down the line there will be some haves and some have-nots within the space as well. CW: Who will be the haves and the have-nots? Maglio: Starz will be No. 1. I’ll let the others jockey for position behind me. Showtime On Demand
At a Glance Launch date: 2002
Subscribers: 6 million*
Top three requested titles in July and August: Weeds, Barbershop, Stepford Wives *Includes The Movie Channel On Demand, launched in 2003.
Source: Showtime here! On Demand
At a Glance Launch date: 2004
Subscribers: n/a
Top three requested titles in July and August: Third Man Out, Margaret Cho: Assassin, Naked Fame Source: here! TV Starz On Demand
At a Glance Launch date: 2001
Subscribers: 3.7 million
Top three requested titles in July and August: Mr. 3000, Cellular, Little Black Book Source: Starz Entertainment Group HBO On Demand
At a Glance Launch date: 2001
Subscribers: 8 million
Most requested titles in July and August*: Entourage, Six Feet Under, Shrek 2 *HBO estimates
Source: HBO

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