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Man in demand

Jan 21, 2002  •  Post A Comment

Steve Brenner is in an enviable position. His company is one of the leading suppliers of one of the hottest applications in the entertainment business-video-on-demand. The New York-based company is owned by four of the five biggest cable operators, which means its owners reach about 60 percent of U.S. cable subscribers.
That’s a sweet spot to be in, since VOD is considered by many to be the killer application of interactive television as well as the key weapon needed by cable operators in the competitive war against satellite providers.
In 2001, about 1.9 million homes had access to VOD, according to Forrester Research. The research firm predicts that nearly 6 million cable subscribers will have access to VOD this year, a number that will grow to 36 million by 2006.
Mr. Brenner’s iN Demand is poised to capture a large share of that market. The company is owned by AT&T Broadband, Time Warner Entertainment, Comcast Corp. and Cox Communications. Together, those four operators reach more than 40 million of the nearly 70 million total cable homes in the United States.
Already iN Demand has snared more than half the current VOD homes. The company’s VOD service first launched in the summer of 2000 and now reaches about 1.3 million homes.
The VOD service is in many ways an extension of the company’s already successful pay-per-view offering. The company’s PPV network serves more than 60 million cable homes. iN Demand has offered pay-per-view since the company was founded in 1985 as Viewer’s Choice.
The company relaunched under its new name in early 2000, and Mr. Brenner joined that July as president and CEO after an 18-year stint at USA Networks.
He’s already had an impact on iN Demand’s content partners, according to Jack Waterman, president of worldwide pay TV with Paramount Television Group. “For us, we’ve always had difficulty concluding transactions with iN Demand. As soon as Steve came on board, he called me, we had lunch and we extended our [PPV] deal. He’s just the kind of guy who gets deals done,” he said.
Since joining the company, Mr. Brenner has had two guiding goals: “To increase the size and the importance of the category and to make sure what we could provide for cable operators would be compelling enough to stem the loss of subscribers from DBS,” Mr. Brenner said.
With iN Demand, a cable system can offer a 65-channel PPV network compressed into seven to eight digital channels and can offer all the major sports packages-such as MLB Extra Innings and NHL Center Ice-with the exception of the NFL, which is exclusive to DirecTV.
VOD is essentially taking PPV to the next level, Mr. Brenner said. “People will rent movies, so we need to tell them how easy and convenient it is [to watch them through VOD]. VOD is the home run in increasing the category,” he said.
Driving growth
It certainly doesn’t hurt that VOD is something satellite providers can’t offer. That’s why growing this business is key to the success of cable in the multichannel war. “For the first time, cable operators can say, `We have a better product,”’ Mr. Brenner said.
To drive growth in VOD, two key things must happen: marketing and program acquisition, he said. “I think we have a chance to create a great new business if we can market and show people how easy it is to order a movie at home and how we have all these functions like Pause-so you can go to the bathroom, get something to eat, answer the phone,” he said. Since VOD is a new product, customers won’t know they have it until someone tells them through cross-channel spots, barker channels and direct-mail pieces, he said.
Of equal importance is cementing agreements with major movie studios, which have been somewhat reticent in the past to develop VOD deals and thereby possibly incur the wrath of their bread-and-butter distributor-the home video store. Inking the first few studio partners was the toughest, said Mr. Brenner. Universal and Sony both signed on this summer.
With its ownership structure, iN Demand is well positioned to succeed in the VOD market. However, it needs to be aware of its position as the middleman, said Michael Goodman, senior analyst with the Yankee Group in Boston.
Striking deals
“Anyone operating as a middleman runs the risk of being squeezed out if push comes to shove,” he said. That’s why it’s important for iN Demand to offer alternative content other than just studio movies, he said.
The company has done that through deals with ESPN for classic sports programming, Comedy Central for episodes of “South Park” and Atom Films for shorts, among others. iN Demand also has deals with Artisan Entertainment and Hallmark Entertainment. “We are building a fairly robust slate of content. We need to fill it in with a couple more deals from major studios. We would like to get them all,” Mr. Brenner said.
He expects to have at least two more deals completed by early this year. As the company strengthens its relationships with the studios, Mr. Brenner hopes iN Demand can push the VOD release window a little closer to the home video window.
Today home video rentals account for 65 percent of the industry’s revenue, according to Forrester. However, as VOD begins to encroach on that share, cable companies will be able to pressure film distributors to secure better release windows, predicted analyst Eric Scheirer, in a March 2001 report. On-demand delivery will grow 40 percent each year to surpass home rental revenues in 2005, he concluded in the report.
Mr. Brenner comes to iN Demand from USA Networks. He joined the programmer in 1982 as VP of business affairs and departed as president of operations. After he left USA, he was contacted by Fred Dressler of Time Warner Cable, Matt Bond, who was with AT&T Broadband at the time, and Amy Banse of Comcast, who are all iN Demand board members. Being asked to join a company by men and women with whom he had “fought” previously, since he was on the programmer side of the programmer-operator battles for the previous 18 years, was one of the nicest professional compliments he’s received, he said.