VOD The Must-Have Killer App by dfgh4bnmu


									                                                                                                                      May 8, 2007
                                                                                                                          No. 18
                                                                                                                           Vol. 6

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                                    VOD: The Must-Have Killer App

Mainstreaming VOD            2
                                        ideo-on-demand has become such an integral part of the multiplatform
VOD On The Rise              2          business that programmers, technology vendors and video distributors all
Catching On                  4          see it as a “must-have” product offering. Industry analysts have pegged
                                  annual revenue in the United States generated from movie VOD purchases at
DBS On Demand                     nearly $1 billion. And that only scratches the surface, given that TV shows
Bulks Up                     6    from broadcasters and basic networks, premium VOD titles and adult fare have
                                  become part of the on-demand mix.
Map Data:                           More content providers are embracing the video “killer application.” So far,
Cable VOD & DVRs             7    cable has successfully exploited on-demand, yet telco companies and satellite
                                  TV are doing their best to replicate the video incumbent's successes with VOD.
  Under the BRIDGE                  This issue of The BRIDGE is dedicated to VOD, its successes so far and
Everything Old                    what small dish companies are doing to bring on-demand content to their cus-
is New Again                 8    tomers.

         Heads Up                            Day & Date: Driving VOD Revenue

NCTA holds its annual Cable
                                       fter years of            Video-on-Demand Revenue Projections
Show this week in Las Vegas.           disappointing 4000
  It's not the biggest gig this    PPV/VOD revenue
  week in Sin City, given that     due to both lack                   Cable

  the National Kitchen and

                                   of high quality
 Bath Association also is in       films (i.e.                       Studios

   town with its convention.       delayed windows) 2500

 Both associations are provid-     and depth of
                                                       (In Millions)

                                   product (relative- 2000

ing their respective attendees
                                   ly few products
courtesy, reciprocal admission

                                   offered by cable 1500

   to both shows, being held       operators),
concurrently in separate parts

                                   Merrill Lynch                                                       $1,437
of town. Scripps Networks,         analysts are say-

which works with both associ-      ing the market


ations, proposed the partner-

                                   dynamics are

        ship between the           about to change.
                                   Studios are test-

                                                            2006       2007    2008      2009         2010       2011
                                   ing better win-                                   Source: Merrill Lynch Research (1/07)

Click Here for a FREE
                                   dows (day-and-
                                                                                                          The BRIDGE 2007

                                   date releases for VOD), cable ops' improved infrastructure allows them to
 Subscription to The               carry huge libraries, and digital cable penetration is booming nationwide.
                                   "With these changes, growth in VOD could be the next driver of profitability
                                   for major studios and could help bridge the growth gap," the firm says.•
                                                                                                       VOD - May 8, 2007

                 Mainstreaming Video-On-Demand

                How Providers, Studios and Consumers Benefit from VOD

                                             VOD On The Rise
by Matthew Colella                                                                                ing in the broadband
    t’s been a long time                                                                          department, booming
    coming, but it seems                                                                          broadband popularity
    that after years of                  Video-on-Demand Household Projections                    and rising digital cable
speculation about its use-           50                                                           penetration are two of
fulness, its scope, and its                                                              45.6     the top reasons why
prospects – video-on-                                                          40.5               VOD has such a prom-
demand is finally coming of          40                                                           ising future. Add in
age. Now that the pay-TV                                             34.7                         growing consumer
industry is embracing the                                                                         acceptance and usage
watch-it-when-you-want-it            30                                                           of on-demand video
                             (In Millions)

technology, the question                         23.9
                                                                                                  delivery (via both TV
on many minds is which                   19.5                                                     and PC); declining DVD
                                                            VOD HHs
platform will capitalize on          20                                                           sales and sagging box
the service, and which                                                                            office numbers; and
ones could drop the ball.                                                                         plus the increase in
   Industry analysts have            10                                                           usage of next-genera-
pegged annual revenue in                                                                          tion content sources,
the U.S. generated from                                                                           it’s no surprise the
movie VOD purchases at                0                                                           experts are saying VOD
nearly $1 billion – so the
                                      2004       2005      2006     2007       2008       2009 is on the verge of going
stakes are high, to say the                                                                       supernova.
                                                                      Source: SeaChange 2007
least. But considering

that figure represents less                                                  The BRIDGE 2007
than 4 percent of the              n spite of the challenges video-on-demand has faced in                  Trials
$27.2 billion overall home         recent years including the impact of DVRs, and band-
entertainment market of         width constraints, VOD services still offer the potential to         Pay-per-view movies
purchases and rentals in        be a major revenue source for distributors. According to          sold on-demand are
2006, the dynamics of           Kagan Research's recent video-on-demand analysis,                 already growing into a
VOD become more capti-          growth in cable VOD homes going forward will primarily            formidable source of
vating.                         result from growth in digital subscribers rather than from        revenue for cable oper-
   We know what you’re          new cable systems adding the VOD feature. "Multichannel           ators across the board.
thinking ... $1 billion ain’t   services are undergoing a fundamental transformation,"            However, as more
chopped liver. Even more        says Kagan analyst Ian Olgeirson, "and the mainstreaming          movie studios and serv-
compelling is how some          of on-demand delivery is a core component of that                 ice providers increas-
content owners and dis-         change." Here, SeaChange data reflects the growing                ingly implement debut
tributors have embraced         importance of on-demand delivery as VOD households con-           dates that correspond
VOD’s potential more than       tinue to rise nationwide.•                                        with the release of
others. But during the                                                                            DVDs, many within the
next few years, industry                   tors have long dreamt of, and telco                    industry are predicting
observers are predicting the conver-       TV providers are adopting on the fly.    big things for the technology.
gence of several factors that will           Despite the recent Federal               A recent report from Bernstein
make video-on-demand the killer            Communications Commission                Research’s pay-TV guru Craig
application cable and satellite opera-     study that suggests America is slack-                              >See VOD 3

                                                                                                    VOD - May 8, 2007

<2 VOD                                   Warner began testing the same           across the nation with 84 percent of
Moffett suggests that as on-demand       VOD day-and-date release strategy       those households having access to
release dates for popular movies         in Greensboro, N.C. along with a        VOD (up from less than 20 percent
inch closer to the same dates as         new “virtual video store” of an addi-   just 5 years ago). In December
retail distribution, sales and profits   tional 2,000 VOD titles. The offering   alone, Comcast said it delivered 180
for video-on-demand could shoot          was about the equivalent of a typical   million streams of VOD programming
through the roof. The analyst esti-      brick-and-mortar Blockbuster            across its footprint with nearly 70
mates that the $1 billion generated      Video store, and noticeably larger      percent of its digital subs using the
last year via on-demand movie pur-       than most libraries on rival VOD        technology. According to the cable-
chases could surge to $4.1 billion       platforms.                              co, digital cable subscribers viewed
per year if the current gap between         At the end of calendar year 2006,    some video-on-demand stream on
home rentals and on-demand release       industry numbers estimated digital      an average of 27 times per month -
dates continue to erode.                 cable penetration to be 50 percent                                >See VOD 4
   Toward the end of last year,
Comcast launched a potentially rev-
olutionary initiative in Denver and
                                              To Our Research Sources ... Thank You:
Pittsburgh by offering newer movie                 CentrisBRIDGE                        Bernstein Research
titles on-demand on the same day             http://www.thebridgedata-               http://www.bernsteinre-
they are released on DVD. The                       group.com                              search.com
cable giant’s deep pockets brought a                  Merrill Lynch                       Kagan Research
lot of street cred to the project, and            http://www.ml.com                   http://www.kagan.com
soon major companies signed on –
including Disney, Lionsgate, NBC                      eMarketer                              DIRECTV
Universal, Paramount, Warner                  http://www.emarketer.com                http://www.directv.com
Bros. and 20th Century Fox – to                      SeaChange                               DISH
offer several popular titles.                 http://www.schange.com               http://www.dishnetwork.com
   At about the same time, Time

                                                                                                         VOD - May 8, 2007

 <3 VOD                                                                                       almost $300 million in 2006,
almost once per day.             Catching On: More VOD Access                                 a jump from roughly $225
   In addition, Comcast                                                                       million the year before. Not
delivered 1.9 billion VOD                U.S. VOD Household Penetration                       including the highly-popular
                                40%                                                           XXX fare being purchased at
streams during the entire
2006 – a 70 percent                                                               34.8%       home and in hotel rooms,
increase year-over-year, the                                                                  Moffett says that non-adult
company says. The               30%                                                           titles could garner nearly
Philadelphia-based cable                                        26.1%                         $434 million in revenue by
company now offers view-                                                                      the end of 2007.
ers more than 8,000 pro-
                                                                                                 The Bernstein researcher
                                20%                                                           says that with Comcast and
gramming choices, includ-
ing 800-plus movie titles,                                                                    Time Warner Cable combining
                                                                                              for an estimated 37.6 million
300 of which are free.
Comcast said about 95 per-      10%                                                           subscribers, the country’s top
cent of its total on-demand                                                                   two cable operators would
content is available at no                                                                    stand to benefit the most
cost to digital cable sub-                                                                    from dwindling release win-
                                  0%                                                          dows. Around $3.2 billion of
scribers, and around 11
                                    2005       2006     2007     2008       2009     2010     the nation’s annual DVD
percent of its VOD streams
(20 million) were movies in                                   Source: eMarketer (11/06)       rental revenue is generated
                                                                                              across Comcast’s footprint

December.                                                               The BRIDGE 2007
   It’s estimated that                                                                        alone – with Moffett estimat-
                                     recent study from eMarketer suggests while TV            ing more than half of those
Comcast amassed about
                                    distribution and access may be changing, more             rental purchases being carried
$480 million in on-demand
                                people will be watching more video content in the             out by existing Comcast digi-
movie revenue in 2005.
                                future, not less. They'll just be doing it in different       tal cable subscribers.
According to Moffett, that
                                ways ... like VOD. The research firm says content                But maybe cable’s biggest
number could basically dou-
                                owners may lose some control of how, when and                 advantage when it comes to
ble to more than $800 mil-
                                where their content is accessed, but what they forgo          delivering movies on-demand
lion by the end of this year
                                in control, they can make up for in reach and addi-           could be selling high-demand,
with the help of shrinking
                                tional touch-points.•                                         high-definition films. The
release windows and more
day-and-date trials.                                                                          entire entertainment food
                                           $863 million from adult VOD and                    chain – from manufacturers
     Content-on-Demand                     PPV in 2005 and another $916 mil-          to distributors to studios – is still
                                           lion last year. In reality, these fig-     struggling to determine which high-
   Most on-demand revenue and prof- ures wouldn’t be affected by the                  def format to adopt for HD movies.
it cable operators take home come          recent push toward day-and-date            As the industry awaits a clear-cut
from sales of adult entertainment.         releases, but the impact on overall        winner between Blu-ray and HD
In fact, according to recent Kagan         VOD movie buys remains significant.        DVD, cable operators have a clear-
numbers published in The BRIDGE,              Comcast said its non-adult video-       cut lane to the consumer by deliver-
satellite and cable operators raked in     on-demand movie revenue totaled                                       >See VOD 5

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                                                                                                     VOD - May 8, 2007

<4 VOD                                  goal of netting 100,000 DVD and HD       the New York Times last week
ing HD on-demand directly to the        quality movies with a lineup of          offering yet one more STB that con-
living room.                            around 1,000 channels.                   nects to a living room TV for movies-
                                          Similar to video products from         on-demand. The service is called
         VOD Via STB                    AT&T and Verizon, MatrixStream           Vudu. It’s going to cost customers
                                        operates off an IPTV platform and        $300 just for the box (not including
  Just in case you thought there        customers have to buy the compa-         service charges), and according to
weren’t enough options for program-     ny’s new set-top, IMX 1020 HD, to        several industry observers, has
ming on TV in today’s multiplatform     get the high-quality vids.               about the same chance of success as
world, think again. There’s a new         This month Akimbo launched a PC        Don Imus getting his job back.
wave of dedicated set-top boxes         version of its TV and movie-on-demand       Vudu does have a few things on its
soon to be hitting shelves that offer   service which is now offered primarily   side: the company inked deals with
the latest video-on-demand libraries    through Akimbo RCA set-tops that con-    many major film studios and the box
to videophiles across the country.      nect directly to the TV. Akimbo also     uses some P2P technology that will
  Earlier this year television tech     recently announced that its service is   help conserve bandwidth costs mak-
company MatrixStream                    offered through AT&T’s HomeZone          ing it possible for users to start
Technologies launched its long-         satellite and internet service.          watching a film basically as soon as
anticipated video-on-demand service       The new PC version will reach more     they’ve selected it. (As opposed to
– MyTVPal.com – using the internet      viewers and offer a wider range of       other services where users have to
to deliver DVD and high-def-quality     Akimbo’s content, including TV           wait for the video to download.)
video content. The company says its     shows, movies and extreme sports.           Some strikes against the service? As
version of the video-to-consumer        However not all of the programming       we’ve noted, many cable subs can
system is superior to others on the     available through the Akimbo set-top     already get movies-on-demand, and
market because other movie down-        will be available online. Movielink,     it’s possible to get paid movie down-
load companies provide sub-DVD          which offers major studio movie          loads via Xbox 360, AppleTV, TiVo
quality content. According to           downloads, will not be available on      (via Amazon’s Unbox service), and
MatrixStream, consumers will get        Akimbo’s PC version.                     Akimbo ... to name a few. Also, indus-
MyTVPal as a monthly subscription         Lastly, there’s another startup ven-   try press have reported that Vudu may
service – sans advertising – with the   ture that received rave reviews in       not have any HD content ... Ouch.•

                                                                                                       VOD - May 8, 2007

                        DBS On-Demand Bulks Up
                              Is It “True”? Does It Matter?

by Evie Haskell                                                                              We can pull in video from
         hen EchoStar's                                                                      other sources. So it's really
         DISH Network                                                                        a building block of DIRECTV
         launched the first                                                                  as the key to entertainment
ads for its video on demand                                                                  in the home.”

service, the cable crowd                                                                        While DIRECTV tests its
howled in protest.                    xisting DIRECTV customers can upgrade to the           hybrid VOD offering, DISH
   “But,” they sputtered, “it's       HD20 box with HD, DVR and (soon) VOD capabili-         continues to tout on-
not true VOD!”                    ties for $299 under the lease option.•                     demand via its web site but
   Without getting into a                                                                    is otherwise mostly quiet on
debate over the meaning of                  ing programming in real time or                  the subject.
“true” (true to who?), we must note         faster than real time. But this,” he     The company declined an invitation
that the DISH service comes                 adds, “is a lot of what the beta test  to participate in this article, so we
nowhere close to the robust offerings will tell us.”                               scoured the web to see what's up.
of the typical cable VOD selection.           Assuming the testing works as        As of Saturday, May 5, the DISH
Lacking a two-way pipe, the satellite       anticipated, DIRECTV could start       website listed exactly eight network
version of on-demand has been lim-          rolling the service out to customers   shows (four from the Food Network
ited by the storage space of the digi- by mid-summer. The service, by all          and four from HGTV) plus 22
tal video recorder. And if you do a         reports, will be equally robust to     movies.
count of the actual on-demand pro-          cable offerings: Movies, network         In an emailed statement, however,
gramming available on DISH (which           programming, and a host of special     DISH said, "We are delivering con-
we do, later in this article) you'll see    services would fill the on-demand      tent via our Dish On-Demand plat-
that DBS VOD weighs in like a jock-         menu.                                  form from a number of providers
ey to cable's linebacker.                     In addition, Shanks notes,           including (but not limited to)
   At least so far.                         DIRECTV will be able to “regionalize   Disney, New Line, Lions Gate,
   Now the nation's numero uno DBS          and localize” the programming to       Warner Brothers, Paramount,
provider, DIRECTV, hopes to change offer crowd-pleasing programming                Dreamworks, Universal, Scripps,
that equation.                                                                     FOX Cable Networks, Showtime,
                                            such as dating services or real estate
                                                                                   NFL Network and A&E."
         Going Hybrid
                                                                                   Banking on Moore's Law
   Starting late last month, DIRECTV
                                                A Retention Plan
began the first beta testing of its                                                  In future efforts, DISH, DIRECTV
planned full – or “true” if you adhere      In the beginning, at least,            and other DBS players might score
to the cable crowd – VOD service.        DIRECTV does not plan to use its          better on non-hybrid VOD efforts as
Not surprisingly, this is a hybrid       VOD offerings to lure in masses of        DVR memory continues to rise. As
offering: The satellite broadcasts       new subscribers.                          per Moore's Law, which essentially
are delivered “on demand” to homes          Sticking with the company's long-      states that storage capacities will
having both DIRECTV's high-defini-       announced plans to focus on high-         double every 24 months, techno
tion DVR and a high speed internet       end keepers, Shanks notes, “This is       companies are pushing hard to make
modem (DSL or cable or what have         more of a retention tool than an          DVR/VOD a top quality service.
you).                                    acquisition thing. We want to make        Earlier this year, for example,
   From the satellite viewpoint, says    sure that our existing customers          Harmonic unveiled its StreamLiner
DIRECTV EVP of entertainment Eric        have the best experience possible.”       2000 product line designed specifi-
Shanks, “We have no issues deliver-         In addition, he notes, the VOD         cally to offer “tens of thousands of
                                         offering will “really start to position   hours” of programming via down-
                                         DIRECTV as the cornerstone for            loadable capacity.
                                         (home) entertainment in the future.”        Could such services take off as

     618,000 ...
                                            Thanks to last January's introduc-     viable alternatives to terrestrial two-
                                         tion of the DIRECTV–Intel Viiv            way VOD? Or will hybrid technolo-
                                         hook-up, the DBS co now offers            gies be the answer for DBS on
                                         home networking for music, photos         demand? We suspect the answer
                                         and, of course, video.                    will be a bit of both. And how fast
                                            “Once (the VOD service) is turned      will that come?
                                         on,” Shanks says, “we will not only         Ah, wait for summer. If ads for
                                         be able to deliver the best HD con-       DIRECTV VOD blossom in the August
... in low hanging fruit? That was
                                         tent to the home, we can also talk        heat, you'll know the first “true” DBS
the number of DIRECTV/Verizon
                                         music and photos around the house.        on-demand service is on its way.•
subs at the end of 2006.•

                                                                                                   VOD - May 8, 2007

                                Cable VOD & DVRs
                                         How Big A Base?

                                                                                                           Source: CentrisBRIDGE (05/07)
                                                                                                                        The BRIDGE 2007
                                                                                        by Occupied

O   f the estimated 111 million occupied households in the U.S., more than one in 10, or about 11.5 million, have
    access to video-on-demand services via their cable subscriptions. The highest VOD penetrations in the nation all
come in the state of New York, where the Rochester, New York and Syracuse DMAs all boast VOD penetrations of
greater than 18 percent.
  Households with cable-provided DVRs run far behind the national VOD counts. Only around 5.6 percent of U.S.
households, or 6.2 million, receive DVR services via their cable provider. For cable-DVR usage, the San Francisco-
Oakland-San Jose DMA is the run-away winner with more than 11 percent of all households boasting digital video
recorders from their cable systems.•

                                                                                                           Source: CentrisBRIDGE (05/07)
                                                                                                                        The BRIDGE 2007

                                                                                        by Occupied
                                                                                     Annual: Cable - May 1, 2007

    n der


                             he (approximate) percent of folks in the UK, France, Germany and Spain who
                        T    say they watch TV over the internet. This from a study conducted by
                         StrategyOne for Motorola. Of the heavy web TV users, France scores No. 1 with
                         59 percent saying they watch previews and full episodes of shows over the 'net. The
Germans bring up the rear: Just 33 percent say they watch TV online.
 (A tip of the hat to BroadbandTV News for unearthing the study.)

    urprise, surprise! Early adopters of new technologies ... specifically male early adopters of new tech-
S   nologies ... are the most likely to be interested in mobile TV!
  What a stunner.
  More seriously, a recently released study from comScore says 46 percent of those who currently subscribe
to mobile TV are below the age of 35 and 65 percent of those are male. (Though in defense of older demo-
graphics, we also note that 11 percent of those who subscribe to mobile TV are between the ages of 55 and 64.
Not bad for geezers.)
  In another study stunner, the “cost of service” ranked No. 1 when selecting mobile TV services (71 percent
chose this option) although 67 percent also say they'll watch ads in return for free subscriptions.

  ust how much credence should you give to those rumors about
J Microsoft and Yahoo? Consider this: Yahoo does not use
Microsoft technology. (Hardly any web cos do; they like to devel-
op their own stuff.) But talk about techno trauma ...

                     s OTA the next big thing? Could be as the
                   I “what's old is new again” wave washes over
                   the radical idea of FREE TV, delivered via over-the-air antennas. After the AP ran a story
                   on the swell HDTV signals available via OTA antennas, a CEA website providing info on
                   the rabbit-ear gizmos (AntennaWeb.org) reportedly jammed up with 86,000 inquiries in
                   one day. According to CEA spokes-folks that's about as much as the site usually gets in one

                     Think it could be a trend?
                     (Thanks to B&C for the info.)

                           olks who sat down in front of TVs and shown HD programming from
                         F DIRECTV, DISH and Comcast. Who won the best quality vote? Comcast did.
                         Who paid for the study? Comcast did. Golly gosh.•

                                                                                     Annual: Cable - May 1, 2007

                                    Upcoming Events
May 15-16                           June 28-29                            October 15-17
IPTV World Forum – Eastern          2007 C-COR Global IP Summit           CEA Industry Forum
European                            Cannes, France                        San Diego, Calif.
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