VOD service meets demand VOD service meets demand
By MAUREEN SULLIVAN
06/28/98
Variety
Copyright 1998 Variety, Inc.
Hong Kong people love gadgets, movies and shopping, so it's not surprising that this city is home to the world's first commercial video-on-demand service.
VOD is just one of the applications of the interactive television network known as iTV. Karaoke lovers get music-on-demand and horse-racing fans get racing-on-demand. There's also at-home shopping and banking.
"We believe that having a population with a high disposable income as well as an appetite for new technology, Hong Kong has all the right attributes" for the development of interactive television, explains William Lo, managing director of Hongkong Telecom IMS.
The company, a subsidiary of the city's leading telecommunications conglomerate, Hongkong Telecom, has spent about $167 million over the past four years to set up iTV. It plans to spend another $50 million over the next three years to enhance the system.
The U.K.'s Cable & Wireless owns 54% of Hongkong Telecom.
After spending a bundle, the company began soliciting paying customers in March. The company says it had 64,000 subscribers at the end of April and hopes for 250,000 by the end of March. By then it plans to have doubled - to 85% - the number of households wired with the necessary fiber-optic technology.
"We're happy with the (subscriber) numbers," says iTV rep Michelle Li. "And with the economy not so good, more people may stay home. It may even be a benefit."
Subscribers have been lured in with promotional offers. The installation fee of HK$350 ($45) has been waived for now, and the $25 monthly fee has been halved for the first year. Films are charged on a pay-per-view basis, with 80% of the titles averaging just under $2 per viewing. All other services are free.
That compares with $32 for a monthly subscription to Wharf Cable, with HBO an extra $10 a month and PPV movies starting at $3.25.
As VOD was about to appear, Wharf took the opportunity to add movie channels MGM Gold (which since has gone out of business) and Turner's TNT/Cartoon Network to its lineup. It also added the Discovery Channel and Japan's JET entertainment channel.
Since the launch of VOD, spokesman Garmen Chan says the newcomer "hasn't had any real serious effect" on the cabler.
And Turner vice president Diane Schneiderjohn says TNT, with its library of American classics, isn't in head-to-head competition with VOD and its focus on newer, local films. She believes VOD is more likely to draw viewers away from terrestrial stations.
Overall, analysts have been enthusiastic, or at least cautiously optimistic, about the chances of iTV's success. Benny Wong of Sassoon Securities, however, has his doubts.
"How many people want to spend time at home watching television?" Wong asks. "The concept is like a mini-version of the Internet but now everybody, even 60-year-old retired men, use the computer. I don't think it will bring much heat."
Nevertheless, Wong expects the company to break even in three to four years, in part because the parent company already had the telephone network in place.
Director Shu Kei, whose distribution company sells films to iTV, also has his doubts about the long-term interest from viewers who must be weaned off the habit of free TV. It's already a big deal, he says, for a member of a Chinese family, which often shares a small apartment and one television, to convince the others to switch to "ER" in English.
"For most Hong Kong families, the television set is like public property," he says. "iTV requires people to have autonomy, to be very active, to do their homework. And they have to pay for it."
For instance, Shu isn't sure who would tune in to see "Dekalog," a 10-part series based on the 10 Commandments, from the late Polish filmmaker Krzysztof Kieslowski. And Shu is the one who sold the series to iTV.
"Dekalog" is there because iTV wants to reach into as many niches as possible. In addition to the latest releases, the service will offer classical and alternative titles, animation and documentaries. Once every two weeks, 40% of the selection of about 200 titles turns over.
The company's aim is to have 50% local fare, 40% imports and the remainder pornography, including things such as Japanese animated sex, and kids films. Typical U.S. films on offer include "Batman and Robin," "Face/Off," "Ransom," "101 Dalmatians" and "Evita."
So far, iTV has inked exclusive five-year deals with local producers Golden Harvest and China Star to show their films after the theatrical and VCD windows. It also has deals with Warner Bros. Intl. Television Distribution and Buena Vista Intl. Television.
"We're always trying to do deals with studios," says iTV's Li. "And if we can't do an exclusive deal, we will try to bargain one-on-one for a specific title."
Right now, iTV has the VOD market to itself. But it will face direct competition later this year when the other license holder, Star Interactive Television, is expected to debut its version of the technology.
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