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Cablevision takes out middleman

Jul 30, 2001  •  Post A Comment

Cablevision is breaking ranks with other major American cable operators by seeking to acquire a library of content for its forthcoming video-on-demand service on its own-without the assistance of a separate VOD content aggregation partner, according to cable industry insiders.
Those market experts said Cablevision is still finalizing plans for launching its emerging digital cable service, which will include a video-on-demand component, and that Cablevision still could change course by drawing upon the resources of a VOD content aggregator before its VOD package is introduced this fall.
The multiple system operator has already demonstrated its independence from its competitors in the digital domain by sticking to its own Optimum Online Internet service (at least for the time being, although company officials say they remain open to testing alternative providers) at a time when rival operators are testing multiple ISPs, by choosing Sony’s DHG-M55CB set-top box as the home gateway for planned digital cable service and by developing its own electronic programming guide.
One cable industry executive said he believes Cablevision’s move could signal the beginning of an industry trend. To date, several MSOs, such as Charter Communications, AT&T Broadband and Insight Communications, have avoided negotiating with the hard-bargaining film studios on their own-opting instead to acquire libraries of video-on-demand content from VOD service provider Diva. Similarly, at least four large cable operators-Cox Communications, Comcast Corp., Time Warner and AT&T-are hoping to enlist the services of iN Demand, the VOD content aggregator and service provider they jointly own, if or when iN Demand harnesses the film content from the major studios necessary to build a full-fledged VOD programming arsenal.
But now, whether those aggregators will continue to supply the lion’s share of MSOs’ on-demand content stockpile remains in question. Aside from Cablevision, Charter Communications is also considering licensing VOD content from entertainment studios directly, according to an industry source. Adelphia, another MSO that does not hold an ownership position with iN Demand, is another potential candidate to secure VOD content rights on its own.
Cablevision’s new tactical course is logical, given the considerable assortment of film titles that the operator already has access to through its Rainbow Media Holdings subsidiary. That unit encompasses cable outlets AMC, Bravo and the Independent Film Channel. In addition, film studio MGM, which took a 20 percent equity stake in Rainbow earlier this year, houses a film library with 4,000 titles.
MGM is the latest film studio to explore the possibility of entering the video-on-demand business. Both Sony and Disney have weighed the option of making their film collections available to be viewed on the Internet-Sony through a portal that would be dubbed Moviefly and Disney via its Movies.com site.
Now MGM is plotting an equity investment in an undisclosed developer of technologies for delivering VOD over the Internet. Signaling its newfound interest in the burgeoning VOD industry, MGM recently added video on demand and pay-per-view to the list of business lines that will be handled by David Bishop, president and chief operating officer for the studio’s home entertainment division.
Mr. Bishop put to rest rumors that MGM has licensed its film content to Cablevision. Such market whispers stem from the studio and the MSO’s common interest in Rainbow. However, he said the two entertainment providers are in talks about a possible VOD pact.
While he acknowledged MGM is still unsure about the precise amount of revenue that can be generated through video on demand, he said the company remains upbeat about the market’s potential for yielding returns.
“I think video on demand will become a meaningful business for MGM and all the studios within three years, and in five years I think it will become a significant revenue stream,” he said. “The way we envision the future is the consumer will be able to rent or buy filmed entertainment at retail. They’ll be able to order a video for video on demand through the set-top boxes, through cable infrastructure. We also see the Internet playing a role either through a PC or through a set-top box that has Internet capabilities. Really what it offers is an opportunity to grow the filmed entertainment pie.”