Please do not consume food and beverages while reading the
following article.
story.news.yahoo.com
DVDs take wind out of sails for video on demand
Tue May 7,10:12 AM ET
David Lieberman USA TODAY
NEW ORLEANS -- Cable operators thought that this was the year they would begin taking on Blockbuster with their home video giant killer: video on demand.
The service will be available in about 4 million homes by year's end, up from 900,000 last year -- and in nearly 38 million in 2006.
Cable subscribers could call up movies on a whim, play and pause just like with a VCR and never pay late fees. Operators saw VOD winning much of the cash spent to rent tapes and DVDs, $8.4 billion last year.
But the year of VOD isn't turning out that way, to the chagrin of operators here this week for cable's annual convention. Far from predicting Blockbuster's demise, many say they'll be happy if VOD keeps subscribers from switching to satellite or gets them to spend $15 more a month for digital cable, needed for VOD.
What changed things was the DVD.
More than 25 million homes have players, and 70 million will by 2006, according to Adams Media Research. And Hollywood is hooked on discs that offer a crisp copy of a movie, often with extra features.
Studios sold $5.6 billion worth last year and are headed to $16.2 billion in 2006. And to protect that golden goose, they still offer films to video retailers weeks before they're on cable. That's saved the retailers: ''80% of consumer demand is satisfied in the first four weeks after a movie is released,'' says Blockbuster CEO John Antioco.
Another VOD issue: ''There's a sticker shock problem where people who already pay $60 a month for cable don't want to see it go to $75 or $80 with VOD,'' says Adams Media President Tom Adams.
Investors have heard enough to change their views. Over the past year, Blockbuster stock rose about 50% while suppliers of VOD to cable, led by Concurrent and SeaChange, recently plummeted after rocketing in 2001. Meanwhile, cable companies are down from 20% (Cox) to 60% (Charter and Cablevision Systems).
But cable is adjusting to lowered expectations with new plans for VOD. Most operators will offer a subscription version called S-VOD for premium services such as HBO. Customers would pay as much as $10 a month over the fee for the channels to be able to watch their shows on demand.
There are other creative ideas. Rainbow Media has designed a VOD package called Mag Rack. It offers shows designed for people interested in 24 subjects as wide-ranging as gold, Shakespeare, photography, sports, wine, cooking, parenting, yoga and the Bible.
And in September Comcast plans to give Philadelphia digital customers 750 free hours of news, sports, kids shows and more on demand from broadcast and basic cable channels. It will throw in HBO, Showtime or Starz/Encore's S-VOD for subscribers to those channels. ''A consumer's first choice would be, 'Do I want to watch scheduled programming or on demand?' '' says Comcast Cable President Stephen Burke. ''This has the potential to transform television.''
Blockbuster isn't taking its franchise for granted. In July it will test in New York City and elsewhere a $25-a-month subscription that lets customers take out three DVDs and swap for new titles, as they want.
And it wants to revive an ambition to use its marketing skill and customer database to build its own cable VOD or pay-per-view service. |
