Ask and You Shall Receive
Video on demand is an idea whose time has come -- almost
By GEOFFREY A. FOWLER (Wall Street Journal)
The next big thing in home entertainment, the technology to serve up instant access to movies, is creeping its way into America's living rooms.
Video on demand, or VOD, has long been touted by cable operators and Internet companies as the avid movie viewer's dream -- access to a multitude of classics or recent box-office hits at any time without ever making a trip to the local video store. With just a few clicks of a TV remote control or a computer mouse, you can download the movie or TV program of your choice onto a TV or PC and view it, pause and replay at your leisure for 24 hours or more.
By 2006, the VOD market for movies is expected to grow to 5.3 million people spending $641.9 million, up from 300,000 people spending $16 million in 2001, according to a December study by Jupiter Media Metrix, a New York media-research firm.
But that's a far cry from the billions the industry predicted only a year ago. The problem: VOD is dependent on digital-cable services, which have yet to take off nationwide. The Internet offers easy access to movies to anyone with a high-speed connection through downloads and streaming Webcasts, but picture quality can be poor. What's more, the list of movie titles offered through both cable and the Internet is still very limited and isn't expected to heavily expand for at least five years.
"Is VOD ready to replace or cannibalize the way we watch TV in the short term? Definitely not," says Lydia Loizides, a senior analyst at Jupiter. "We're still far away from the nirvana of watching everything in a streamed or stored video-on-demand world."
Given that, here's a look at what's currently out there for VOD, what the alternatives are and what to expect in the future.
Cable
Cable companies want to make VOD the centerpiece of their offerings -- and earnings. To that end, they have spent $55 billion to upgrade their cable lines nationwide to a new digital standard. But digital cable -- a premium service that requires a set-top box that's actually a small computer, which offers a greater number of channels and a clearer picture -- is only used in 14 million homes nationwide so far, and many areas still don't offer it. So VOD isn't likely to fully take off until digital cable does. And the process could be slow, since it costs cable companies as much as $100 to make digital cable available to each subscriber and an additional $40 to $80 to provide VOD, according to Jupiter.
Cable provider Charter Communications, St. Louis, already offers VOD to half a million customers in 12 cities and it plans to roll out the service in two more cities in the coming months. Others -- including Comcast Corp., Philadelphia, Time Warner Cable, Atlanta-based Cox Communications Inc., Cablevision Systems Corp., and New York-based AT&T Corp.'s broadband division -- also are expanding their VOD market.
VOD via cable works like this: A viewer goes to a channel showing a list of available movies and TV programs and using the remote control selects something to view. Via fiber-optic lines, cable companies can update each digital box with their latest offerings. So when a home viewer picks a movie, the cable operator's servers stream out DVD-quality video into just that single digital cable box. The movie or TV program is usually available for 24 hours.
An individual VOD movie typically costs $3.95 for a recent release or $2.95 for a library title. That's on top of the monthly subscriber fees for digital cable. Another option is subscription video on demand, or SVOD, in which customers pay a monthly fee for unlimited access to a library of special content whenever they want. For instance, Time Warner Cable, a unit of AOL Time Warner Inc., New York, offers a subscription-based on-demand HBO system for as little as $3.95 a month, where viewers can pull up episodes of "Sex and the City" and other HBO programs any time.
In coming years, cable operators say, viewers can expect vast libraries of VOD titles. For now and at least the next five years, however, most VOD systems will offer only a trickle of movie offerings, says Jupiter's Ms. Loizides. There are usually about 200 titles -- 60% popular movies, 40% adult and special interest -- available in most places with VOD offerings. Cablevision, Bethpage, N.Y., has some of the most extensive offerings: over 600 titles, of which 40 to 80 are recent releases.
Holding back releases for VOD is the fact that the rights to broadcast many films and TV programs are locked in licensing deals for years to come. So many older movies and sitcoms won't be available on VOD until those rights and syndication deals expire. Another delay: the hierarchy for movie access. After leaving theaters, movies first are available in airplanes and hotels, then on video and DVD, and finally on VOD and pay-per-view -- as long as six months after they've left theaters. For now, movie studios are concerned about eating into video and DVD sales and rentals. But studios and VOD companies say they will eventually strike more favorable deals to get a greater number of new movies on VOD sooner when the technology becomes more widely used -- and, for movie studios, when VOD becomes as lucrative as video and DVD sales and rentals.
The Internet
Another source for VOD is the Internet. Go to a Web site, download the movie and watch the streaming video on a PC. Typically, all you need is a connection of at least 580 kilobits per second -- the standard measure for Internet bandwidth -- and Microsoft Media Player software.
To be sure, Internet VOD sites offer content you might not easily find on cable, like independent films -- though, like cable, selections for Hollywood movies still are limited. At CinemaNow.com (cinemanow.com), a Marina Del Rey, Calif., company majority owned by Lions Gate Entertainment Corp. of Vancouver, you can watch some 350 Hollywood and cult titles. Some downloads are free, and some cost $3.95. There's also a premium package that allows you to download as many movies as you want for $9.95 a month. San Francisco-based Alwaysi.com (alwaysi.com) charges a monthly subscription fee of $9.99 for access to its independent movies. Atom Shockwave's AtomFilms.com (www.atomfilms.com), San Francisco, offers free access to independent art, comedy and student films. (The firm says revenue is derived from advertising, sponsorship syndication and sales.)
Intertainer.com (www.intertainer.com) offers access to some top titles, such as "Shrek," as well as special-interest shows like an hour of vocal-chord surgery. Users must have a broadband connection to stream movies from Intertainer.com, which is jointly owned by Microsoft Corp., Redmond, Wash., Japan's Sony Corp., General Electric Co.'s NBC network and Intel Corp., Santa Clara, Calif. The site charges $8 per month for membership and an additional $3 to watch each top title.
But Internet VOD comes with drawbacks. First, the quality of video streamed over the Internet is considerably lower than the DVD-like clarity offered by cable and satellite systems, particularly during Internet congestion.
One way around the poor quality is to first download the films in their entirety. But that requires massive storage space -- as much as 450 megabytes on your PC. SightSound.com (www.sightsound.com), Mount Lebanon, Pa., offers movie downloads, which can take more than an hour to come in, but have higher quality than streamed films. The downloaded movies expire after two days; the fee per movie is $3.95.
Another concern is comfort, since most people don't keep their computers hooked up to the home entertainment system. So you'd better be prepared to watch "Crouching Tiger, Hidden Dragon" on your computer screen, sitting in your desk chair.
So far, these problems have kept viewers from clamoring for movie downloads. According to Jupiter, only 11% of consumers are interested in viewing movies online.
Internet downloads also pose a big problem for movie and TV producers: viewers' ability to download and save files from a massive collection of bootlegged videos -- and share them. Viant Corp., an Internet consulting firm based in Boston, says 300,000 to 500,000 files containing bootlegged movies are being downloaded on the Internet in a single day. With Internet file-sharing programs like Morpheus, owned by StreamCast Networks of Nashvile, Tenn., you can download an episode of a TV show or movie from a few anonymous friends in cyberspace, then watch it and have a few other anonymous friends download it from you. Users of file-sharing technology like Morpheus store the files themselves; Morpheus just works as a sort of search engine to help users locate the specific files they want from other users.
The Motion Picture Association of America sued StreamCast in October in the Central District Court of California on behalf of 28 movie studios and recording labels to halt the file swapping. StreamCast says the company isn't to blame because its service lacks central servers that can control the content of files that users swap.
A site called Movielink.com may soon provide an Internet solution both for movie buffs looking for a larger legitimate library of titles and for studios threatened by ever-growing piracy. In August, five of the largest U.S. movie studios -- Metro-Goldwyn-Mayer Studios, Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Brother -- formed a joint venture to distribute their movies on demand via the single site. But the service doesn't even yet have a launch date, says the Los Angeles-based company.
Satellite and DVR
Since widespread availability of VOD is still years away, for people who want the VOD experience right now satellite systems coupled with digital video recorders may be the closest thing.
Call it "near VOD." Satellite systems offer an expansive selection of movie and other channels, but they can't provide VOD. They lack two-way communication to send a viewer's individual selections to the satellite. They can only cue up pay-per-view selections every 15 to 30 minutes, available to all viewers simultaneously.
But by combining satellites with digital video recorders, or DVRs, viewers can record movies or other programs offered by satellite and cable systems onto a DVR's personal digital server. Those movies can then be watched later at the viewer's convenience. What keeps this from being a true VOD experience is that people still have to follow a channel's viewing schedules for the stuff they want to record.
And costs of combining a satellite and DVR system can really add up. A DirecTV satellite subscription alone can go for as much as $86 per month for all of the premium channels. DirecTV is owned by General Motors Corp.'s Hughes Electronics Corp. ReplayTV, a DVR made by SonicBlue Inc., an electronics company based in Santa Clara, Calif., that allows you to record movies and programs without commercials, goes for $700.
Next, companies are starting to offer all-in-one systems -- a DVR complete with a DVD player, cable and satellite hook-ups, a music jukebox, Internet connection and even interactive TV interfaces. Moxi Digital Inc., Palo Alto, Calif., unveiled such a unit in January. The company won't talk specifics about price yet, but says by the end of 2002 the system will be leased by through EchoStar Communications Corp.'s satellite system at a cost comparable to a basic cable or satellite set-top box service. (EchoStar is planning to merge with Hughes Electronics.)
Even with the all-in-one convenience, however, you are still at the mercy of others' timetables. For now, at least, it's still video on delay.
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Growing Demand
A look at the major cable companies that offer video-on-demand services, and the markets where they offer those services
• AT&T Broadband Atlanta, Los Angeles
• Time Warner Austin, Texas; Cincinnati;
Columbia, S.C.; Hawaii (entire state);
TampaBay/St. Petersburg, Fla.
• Comcast Albuquerque, N.M.; Alexandria/Arlington and Chesterfield, Va.;
Baltimore and Howard and Harford counties, Md.; Charleston, S.C.; Mobile, Ala.; Indianapolis, Ind.; Lower Merion and Willow Grove, Pa.; Savannah, Ga.; Taylor and Southeast Michigan, Mich.; Union, Ocean and Monmouth Counties, N.J. and portions of southern N.J.
• Charter Alhambra/Pasadena, Glendale/Burbank and Long Beach, Calif.; Asheville,N.C.; Birmingham, Ala.; Fort Worth, Texas; Greenville/Spartanburg, S.C.;
Gwinnett County, Ga.; Hickory, N.C.;
Newtown, Conn.; St. Louis, Mo.; Slidell, La.
• Cox Hampton Roads, Va.; San Diego
• Cablevision 550,000 homes in Long
Island, N.Y.
• Insight Bloomington, Evansville, Lafayette/Kokomo and Anderson/
Noblesville, Ind.; Champaign/Urbana and Rockford, Il; Columbus, Ohio; Louisville, Lexington and Covington, Ky.
Source: The companies
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--Mr. Fowler is a staff reporter in The Wall Street Journal's New York bureau.
Write to Geoffrey Fowler at geoffrey.fowler@wsj.com
Updated March 5, 2002 11:59 p.m. EST |
