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Thinking Big With VOD

Sep 12, 2004  •  Post A Comment

A number of small cable operators in small markets are setting out to prove that size doesn’t matter when it comes to video-on-demand. From Bend, Ore., to southeastern South Dakota, cable operators whose entire operations barely rival a small system at one of the big multiple system operators are aggressively firing up the full complement of VOD services.

Some compete directly as overbuilders with large cable operators, while others are launching VOD to gain a competitive advantage over satellite. Several systems plan to introduce some of the more innovative VOD ingredients, like high-definition content on-demand and local high school sports as well as an entire assortment of movies, subscription and free content served up at the customer’s request.

PrairieWave Communications, an overbuilder, introduced VOD just two weeks ago across its southeastern South Dakota market. The new VOD offering allows PrairieWave to compete not only with incumbents Charter and Mediacom but also with the growing amount of content being offered on-demand via the computer, said Craig Anderson, chairman and CEO of the company.

“You need to get out there and establish your customer base and emphasize convenience and quality of service. We are focused now on heading off the coming threat of video streaming over the Internet,” he said.

PrairieWave invested almost $500,000 in the equipment and infrastructure needed to deploy VOD. Mr. Anderson expects a return on investment after three years, based on an average buy rate per PrairieWave customer of three to five movies per month at $3.95 each. The company was running ahead of those numbers in the first week of offering the service without having marketed it yet. Mr. Anderson expects orders to further increase in the cold winter months.

The overbuilder offers 640 hours of content each month-hit movies, library titles, adult content and children’s programming-packaged through ViewNow’s aggregated VOD programming service and free on-demand content from Mag Rack and the Scripps lifestyle networks. In addition to ViewNow, PrairieWave relied on N2 Broadband to provide the technology solution platform for the service.

Massillon Cable TV plans to roll out VOD service in November to about 45,000 subscribers in the Cleveland market, where its customers, in some cases, live across the street from Time Warner Cable subscribers. While Massillon is a traditional cable operator and does not compete with Time Warner, keeping pace with large operators, is critical, said Bob Gessner, Massillon president. “People compare, and I regularly get calls from people saying, `Time Warner does such and such. Why don’t you?”‘ he said.

Massillon’s VOD offering will rely on a package of content from TVN Entertainment that includes 100 hours of new movies, 200 hours of library titles, 30 hours of independent films, 75 to 80 hours of adult content and about 40 hours of kids programs each month. Mr. Gessner hopes to include subscription VOD from the premium networks and some free content from the basic networks.

Mr. Gessner said Massillon will have spent at least $350,000 in capital expenses to deploy the service. He’s not convinced there’s a profitable economic model for VOD yet but said the investment was necessary. “I think everybody takes the larger view that you have to do it. VOD is perceived as a competitive advantage, not just an equalizer,” he said.

Later this month BendBroadband, a cable operator in Central Oregon, plans to introduce VOD, also with content delivered by TVN Entertainment. BendBroadband has the capability to deploy high-definition content on-demand because it’s using VOD servers from nCube, said CEO Amy Tykeson. “It’s a growing market,” she said, adding that sports content could be a key driver for high definition over VOD.

Sunflower Broadband expects to launch VOD in January to its 30,000 customers in Lawrence, Kan., said Patrick Knorrs, general manager. Costs have come down, and Mr. Knorrs anticipates having as many as 2,000 hours of content available on-demand. Next year he’d like to add local newscasts, local high school sports and long-form advertising, as Cox has done with its FreeZone service in San Diego.

Buckeye Cablevision offers local high school and college sports from Buckeye Cable Sports Network in its on-demand lineup in Toledo, Ohio, said Jim Brown, director of engineering at Buckeye CableSystem.

Three years ago a large operator could deploy VOD for about $600 per stream, said Jeffrey Binder, president of VOD server company Broadbus. Today, small operators can introduce VOD for about $400 to $500 per stream, putting them in the position that larger operators were in when they began to roll out VOD, he said.