NBC Universal is talking to cable operators about deploying a video-on-demand offering within the next few months that will include current episodes from its networks in a best of cable and best of broadcast prime-time lineup.
Such an offering is likely to include NBC shows “Las Vegas” and “Law & Order: SVU” as well as Bravo’s “Queer Eye for the Straight Guy,” USA’s “Monk” and Sci Fi’s “Battlestar Galactica.” In addition to current episodes, the VOD lineup will include past seasons’ episodes of some shows.
“If `Monk’ and `Battlestar Galactica’ and `Queer Eye’ and some of our prime-time content were on VOD, that would be a big boon to the [set-top] box,” said David Zaslav, president of NBC Universal Cable. He added that NBC Universal is currently working out a financial model with distributors so it can be compensated for providing such high-demand content for VOD.
NBC Universal’s progress in VOD is significant for many reasons. The content company has said it wants to be the first broadcast network to make current prime-time content available on VOD on a regular basis (Fox offered “24” on-demand in 2003.) In addition, NBC Universal’s now rosier position on the possible permutations for a financial model for VOD is emblematic of the fundamental shift in thinking within the cable industry since the National Cable Show in New Orleans in May, when head-scratching and consternation about how to monetize VOD were pervasive themes for programmers.
Now many content owners seem more receptive to opening their vaults as the financial justification for VOD is being built on the advertising opportunities in the medium. That is in addition to the compensation folded into the vast programming deals that cable operators are now forging with programmers that include not just analog and digital carriage but also VOD and high-definition channels.
NBC Universal isn’t alone in wanting to get paid for its content. ESPN has said the same, and Turner and Fox Cable Networks have also vocalized their preference for subscription or a la carte pricing for some of their VOD content. But getting paid doesn’t have to mean the cable operator cuts a check for “Law & Order” on-demand, Mr. Zaslav said.
“There are other ways to skin that cat, and I think you are starting to see that. Some of the deals you see where content is free, the content is free on VOD but the cable operator is paying a higher sub fee for those channels in return. Ultimately, we are looking for meaningful value for our content, as I think all content owners are. I think we are getting closer,” he said.
Along those lines, Discovery Communications, for instance, re-upped with both Comcast and Adelphia this year, inking broad affiliation deals not only for continued carriage of its digital and analog networks but also for the rollout of Discovery on Demand and Discovery HD Theater.
The conversation about VOD has changed from six months ago, when skepticism over a financial model was more persistent. Now it seems clear that top-notch broadcast content and the most popular current cable shows will find a home on the VOD platform; the lingering questions are when and at what price, since content owners need to protect the aftermarket value of their shows .
“Now the conversation is how to bring [the content] to market in a way that creates incremental value,” Mr. Zaslav said. “I am confident that over the next [few] months we will find out a way to do something broadly. The cable operators didn’t spend all this money on this platform to provide reruns of old content.”
While the top draws in NBC Universal’s VOD offering are likely to be its marquee prime-time titles, the company recently completed the process of cataloging the VOD rights for its vast storehouse of current and library content. Drawing from its 10 cable channels, its movie library and the NBC Network, the company has cleared VOD rights for about one-third of NBC’s prime-time content, more than half its TV library and thousands of movies. That doesn’t mean all that content will be available on VOD, though; those numbers represent the well from which NBC can draw as it fine-tunes its slate.
Mr. Zaslav said NBC Universal has not yet determined whether the existing ads will run in the VOD versions of the shows. He did say the VOD offering will include new forms of advertising. NBC Universal is also considering added VOD-exclusive content, such as extra footage or uncut versions.
While “Joey” would appeal to consumers, the risk for a broadcaster is that the VOD platform disrupts the existing Nielsen business model, said Mitch Oscar, executive VP at Carat Digital. That’s why content owners are so adamant that they be compensated for VOD carriage either through advertising, better distribution of digital channels, which could include new, yet-to-be created channels, or higher license fees, he said.
Content owners may be most successful, though, in producing VOD-exclusive content that also drives viewership of the linear show, such as a different ending for “Joey” on the VOD platform, he said.
The key to bringing top-of-the-line content to the on-demand platform lies in evolving a business model that achieves an acceptable comfort level for content rights owners while allowing distributors to generate a reasonable return through ad revenue, subscriber fees or both, said Paul Rule, president of research firm Marquest Media & Entertainment Research.
“For ad-supported content, there have to be changes in the way advertising, products and sponsorship are packaged with the program content, and there may need to be some sort of subscription model,” he said.