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Technology Tying Knot

Dec 1, 2003  •  Post A Comment

Two of cable’s favorite alphabet soup technologies-VOD and HD-are on a course to collide sometime next year.
While cable operators are particularly keen on their high-definition and video-on-demand services as separate businesses, they are also planning for the union of the two red-hot technologies.
But though the early adrenaline is flowing, cablers are fully aware that the prospect of delivering HD over VOD is not without its challenges. HD files are much bigger, for one thing.
“It’s a stage hog and a bandwidth hog,” said Greg DePrez, VP, subscription VOD, at Starz Encore Group, which offers its SVOD service Starz on Demand and also a subscription HD on-demand service.
In fact, economic and technical issues must be resolved before HD content can be streamed on demand regularly. Cablevision is the only operator to have made the leap; it rolled out HD over VOD earlier this summer. Time Warner is expected to follow suit early next year.
Experts from VOD providers, cable operators and equipment vendors differ on the specific hurdles to be crossed, but most expect the costs to come down soon and the service to be rolled out in earnest next year. Here’s what experts have to say about what’s involved in provisioning HDTV over an on-demand platform.
The basic building blocks of the equation are indisputable. It’s all about size. An HD file is usually about four to five times the size of a standard-definition file, Mr. DePrez said.
That means more storage and more streaming. If an operator needs more storage, it can move to a bigger server, buy more capacity for the existing one or buy more streams, he said.
For instance, most operators use about 1,500 hours of on-demand storage on average, Mr. DePrez said. That’ll go up to 3,000 hours next year for the same price, as the notion of Moore’s Law, which states that the cost of technology drops as the capability increases over time, comes into play.
If operators added HD content on demand next year, that means they conceivably could add 300 hours of HD content in the space afforded by the additional 1,500 hours, he said. “What an operator paid this year for storage at 1,500 will be same as 3,000 next year,” Mr. DePrez said.
Operators also can charge a premium for HD content. If a movie in standard definition costs $3.99, it’s reasonable to assume viewers would pay $5.99 or so for a movie in HD, he said.
Is that enough, though? asked John Hildebrand, VP, multimedia technology, at Cox. An operator can’t charge fives times the cost of a standard-definition movie, so the economics will need to be adjusted somehow.
“It’s something we have started to look at and figure out the bandwidth and the economics of it,” he said. “I believe customers would need to pay more than $4 for a movie in HD because it will cost operators more to deliver it,” he said.
The licensing splits with the studios may change, while more efficient delivery methods could be used, such as MPEG-4 instead of MPEG-2, he added.
While Cox has no definitive plans at the moment to deliver HD content on demand, the service is an attractive competitive possibility since satellite can’t deliver HD on demand, he said.
As cable operators move toward a fully digital distribution model in the future, an all-digital network, based on less expensive and more efficient software encoding rather than hardware encoding, could handle on-demand HD more effectively, Mr. DePrez said.
The bulk of the cost in delivering VOD is in the royalty fees to the content owner rather than in the streaming, said Jay Schiller, senior VP of market development at nCube. While streaming and bandwidth may be more expensive, it’s important to remember that operators will gradually add HD titles to the SD on-demand content, creating a blend for some time. Such a measured approach means that the costs can be spread out and the on-demand platform can be tweaked gradually to accommodate HD, he said.
The cost per stream is higher for HD, but it may not be three, four or five times more expensive than an SD stream because the cost depends on the market and the product offerings, said Joe Ambeault, director of broadband systems at VOD server and software maker SeaChange. Some markets might be able to handle an HD on VOD deployment without any changes, he said. Others would need some adjustments, but such fine-tuning may be necessary anyway as VOD usage increases.
SeaChange also plans to deploy the capability to insert advertising into an HD on-demand stream sometime next year, representing a new revenue opportunity.
“HD viewers are the most attractive advertising audience. That’s another aspect that helps get better content into the pipeline,” Mr. Ambeault said.