Video-on-demand: Regain The Focus

Dec 8, 2003  •  Post A Comment

Why is Sam Bloom smiling?
You would think that as Blockbuster’s VP for business development, Bloom would be sending out his resume. After all, isn’t video-on-demand supposed to put the video rental giant out of business?
“I’m not worried,” Bloom told me at a recent industry conference. “Just look at the numbers and how our profits keep growing. Video-on-demand isn’t changing a thing.”
Bloom is right. Although cable operators have launched VOD services in approximately 15 million homes, Blockbuster’s revenues continue to climb. In fact, the company is far more concerned about online DVD rental services, such as NetFlix, than the on-demand business.
So what’s going on? Many analysts, myself included, have predicted that VOD will be the next big thing. With the touch of the remote, you can watch a new release for the same price you would pay to rent it at a video store. Who wouldn’t do that?
As it turns out, a lot of people.
Thus far, video-on-demand has been video-not-in-demand. Buy rates are far below expectations, and cable TV officials have already started pointing the fickle finger of blame. (Satellite TV operators, such as DirecTV, do not have the bandwidth to offer on-demand services.)
For instance, in a recent Los Angeles Times article, Kip Simonson, VP of marketing for Charter Communications, criticized the studios’ policy of not releasing films on VOD for at least 30 days after they are first released in the video store. (The studios do this to protect the video stores, which generate billions more in revenue than home pay services.) Simonson told the Times’ Jon Healey that the late release is “the single biggest contributing factor” holding back the VOD business.
Other industry officials have blamed such factors as the down economy and the growing fear of new technology among consumers. However, if cable executives really want to find out why VOD has failed, they need only to look in the mirror. The industry has done such a terrible job of marketing the service that the average consumer has no idea what it is.
Confusing Array
Video-on-demand was conceived as a more convenient way to watch movies at home. Rather than fighting traffic and risking late fees, you could watch a new video release without leaving your couch-and without waiting. When the technology emerged in the late 1990s it seemed it couldn’t miss. Around that time, in a joint study I did with with Nielsen Media Research, consumers indicated they would dramatically reduce their trips to the video store if they had VOD.
However, the cable industry has somehow lost sight of the original concept. Cable’s on-screen VOD menu is cluttered with a confusing array of options, from movies to on-demand TV shows to special-interest videos. The TV-based services, such as HBO on Demand, usually are given more space on the menu. If you wanted to see a new video release, such as “Daredevil” or “Anger Management,” you wouldn’t know where to start.
To make matters worse, cable has tried to market VOD as everything from a TiVo-like device to a media storage unit. For instance, a current Comcast commercial for VOD emphasizes that “Your television will obey you” because you can watch TV shows on your schedule. In another spot, Comcast gushes over the massive inventory of on-demand programming. In a third ad, which is shown in movie theaters, Comcast says simply: “Rent Movies and Never Return Them.”
In trying to be everything, cable has turned VOD into nothing. It seems that the industry has forgotten the first rule of marketing: Keep it simple, stupid.
Phillip Swann is president and publisher of TVPredictions.com. He can be reached at Swann@TVPredictions.com.