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Advertising comes to video-on-demand

May 6, 2002  •  Post A Comment

Cable operators, video-on-demand service providers and programmers have taken steps the last few weeks to launch a new business model: free or ad-supported VOD.
Cablevision Systems, Cox Communications, Discovery Networks, BBC America, Everstream, nCube, Concurrent Computer Corp. and SeaChange have all introduced either free VOD programming or technology that enables ad-supported VOD.
nCube, and video-server competitor Concurrent have each partnered with Everstream to include Everstream’s one-to-one ad insertion software in their servers to enable ad-supported VOD. Blake Squires, chief operating officer of Everstream in Cleveland, expects to see trials of ad-supported VOD from operators later this year, with deployments beginning in 2003 and ramping up in 2004. “The economic model for TV is clearly an ad-supported one,” he said.
Such advertising could be attractive to direct marketers as an opportunity to deliver their message through audio and video rather than just the mail, said John Boland, VP and general manager of the advertising systems group of Portland, ore.-based nCube. He predicted that on-demand advertising will eventually include ads before feature movies.
VOD server provider SeaChange plans to introduce a one-to-one ad replacement technology for VOD in June, said James Kelso, VP and general manager for broadband systems for SeaChange in Maynard, Mass. The company announced in late April its Product Showcase, which allows cable operators to launch tiers of advertorials on such topics as how to buy a diamond ring or build a deck. Product Showcase is designed to be a local cable ad sales tool, he said.
“Movies are a fine application, and SVOD is good, but if you are going to go much further, you need advertising, because you are already hitting subscribers’ wallets pretty hard,” Mr. Kelso said. “Cable operators are figuring out that they don’t have to have Hollywood to move forward with VOD. There is a future out there for other types of content.”
Ad-supported VOD should allow cable operators to add revenue and at the same time gently introduce consumers to the VOD concept in a familiar format. Plus, if consumers get comfortable with a free service, they may be more apt to pay for a movie, cable operators said.
“The value in “free” is people get used to controlling what they want when they want. The leap to a movie then won’t be so big,” said Kristin Dolan, VP of digital product management at Cablevision in Bethpage, N.Y. While the cable operator has offered its Mag Rack niche VOD magazine for free with digital cable since September, it launched in late April another free component to the VOD service, Thirteen on Demand, featuring content from local PBS station WNET-TV. Each week, the service offers about 37 shows, which are digitized and sent to the server for consumer availability about an hour or two after they air on the PBS station.
In June, Atlanta-based Cox plans to introduce FreeZone in its San Diego market, where VOD was launched in late 2000 and is now available to all its digital customers.
FreeZone will consist of short independent films, interviews with local celebrities and long-form advertising. The ads won’t just be like late-night infomercials, though. They will be designed to be entertaining as well as deliver a product message, said John Hildebrand, VP of multimedia technology at Cox. “There is some revenue that comes from this, but it also encourages the use and familiarity with VOD functionality.”
Cable operators need as many weapons to fight digital churn as possible, and they also need high-quality content, given that some studios are still withholding their movies, said Clint Stinchcomb, VP, new media, Discovery Networks, which announced last month plans to roll out a subscription VOD service and a free on-demand service known as Choice 10 Discovery.
It will include 10 to 25 total hours of content in a variety of categories, such as nature, science and health as well as a category called Discovery Sponsor Cinema for long-form advertising.
BBC America plans to launch BBC America Showcase, a free VOD service that will include up to 30 hours of programming and will likely include advertising, and a subscription VOD service, BBC America on Demand, which is also likely to have ads.