Cable operators are likely to continue to feel the heat from satellite providers this year, especially when it comes to advanced services.
At the recent Consumer Electronics Show in Las Vegas, EchoStar offered its counterattack to cable operators’ competitive trump card of video-on-demand in the form of a satellite VOD download service. In addition, both EchoStar and DirecTV detailed their plans to offer more interactive services.
ITV pundits have expected a more aggressive move from DirecTV into interactivity since News Corp. acquired the satellite provider a year ago. Now those predictions are coming to market. In fact, several ITV insiders believe that the increased movement into interactivity by satellite operators this year will finally push cable operators into a space they have merely dabbled in previously.
First up is EchoStar’s on-demand service. The satellite operator plans to offer by March a VOD service called Dish on Demand, available to customers who have the DISH Network’s new digital video recorder box-the DISH Player DVR 625. To power the service, EchoStar will download into the DVR’s hard drive about 30 movies that will be available on-demand.
While the amount of content is small by cable VOD standards, it’s the type of content consumers pay for-movies. “The vast majority of [VOD] buys come from a small number of movies,” said Michael Schwimmer, executive VP of marketing and programming at EchoStar.
EchoStar will eventually offer 100 movies at any given time and will allot space on the hard drive for additional cable network content, he said.
While the service is not technically on-demand in the way that cable VOD is, the consumer experience of requesting a movie and being able to fast-forward, rewind and pause it is similar to the cable platform.
Still, Comcast contends that consumers want flexibility and vast choices with on-demand service. The operator’s Philadelphia system now offers 5,000 programs on-demand, and 90 percent of those shows were watched at least once in December, said Page Thompson, VP of marketing and new video products at Comcast. In addition, movie buy rates have risen 63 percent over pay-per-view since the operator first rolled out on-demand service in 2002. “The more free content we have, the more people use on-demand. We’ve seen a consistent increase in the movie buy rate,” Mr. Thompson said.
To that end, Comcast earlier this month added additional free movies and TV shows to its on-demand service from the Sony library as part of the programming deal it struck last year with Sony and MGM. New free films include “The Bridge on the River Kwai,” “Funny Girl,” “Kramer vs. Kramer,” “Places in the Heart,” “Sense and Sensibility” and “To Die For.”
In the interactive arena, DirecTV has begun its expansion. Earlier this month, it fired up three so-called “mosaic” or “mix” channels for sports, news and kids’ networks. A mosaic channel includes small-screen versions of different channels side by side.
DirecTV’s decision to move forward with this kind of interactivity speaks volumes about what consumers want-easier navigation through the hundreds of channels, said Eric Shanks, senior VP of advanced services and content at DirecTV. “Everybody early on had these grandiose ideas of what ITV should be-playing along with `Who Wants to Be a Millionaire,’ buying someone’s sweater,” Mr. Shanks said. “If you boil it down and put yourself on the same couch as your 14 million subscribers, you want to find out what’s on in sports and what’s on in the news programs.”
The satellite provider also plans to beef up the interactivity in Sunday Ticket, its National Football League package. DirecTV will continue to offer two-screen interactivity, in which a user interacts on the computer while watching the game on the TV, but will also launch a one-screen component, enabling interaction via the remote control. Sunday Ticket will also include a mix channel and a dedicated video channel of live highlights.
“We have the opportunity to kind of leapfrog the competition here, and we have to,” Mr. Shanks said.
EchoStar also plans to introduce more interactive mosaic channels this year. EchoStar offered a mosaic channel during the summer Olympics last year featuring six screens of simultaneous Olympics coverage on one screen.
What’s more, EchoStar detailed at CES its plans to introduce a new interactive application this quarter through a partnership with interactive horse racing network TVG. The service will enable interactive wagering on horse races on TV. While EchoStar already carries the linear network and viewers can bet on races via the phone or the Internet, this will be a new application that allows viewers to wager via their remote controls.
The cable landscape for ITV has been sparsely populated to date. Comcast has focused its efforts on VOD rather than enhanced TV, but has a trial of Buzztime’s interactive trivia gaming in Maryland. Charter offers virtual channels, local weather and movie information to about 850,000 digital customers, and is testing a one-screen shopping application with shopping network QVC. Cablevision offers several subscription packages of interactive games.
Cable operators have been quiet about their interactive plans for 2005 and their response to DirecTV’s march into ITV. But ITV vendors and networks are betting big this year.
“I think you will see every [major] operator launch interactive ads and interactive programming,” said Scott Newnam, CEO of GoldPocket Interactive, which programs about 260 shows with interactivity for broadcast and cable networks, a number that should reach 600 to 700 by the end of this year.
He estimates that about 14 to 15 million set-top boxes are enabled for interactivity today, with the majority of those being EchoStar boxes. By the end of 2005, that number should hit 30 million, and full distribution is slated for 2006. Even low-end boxes will be able to handle some ITV programs, he said.
GSN plans to offer interactivity across all 24 hours of its programming this year, up from 12 hours a day, and to introduce more one-screen markets, meaning additional cable operators will deploy one-screen ITV in 2005, said John Roberts, senior VP of interactive at GSN.
Last year, the network rolled out its first commercial launch of a one-screen ITV application, with Oceanic Time Warner in Hawaii. Anywhere from 10 percent to 15 percent of GSN viewers interact with the shows now, about eight times the number of viewers who interact via two-screen.
At GSN, more than 57 of the network’s advertisers use GSN’s interactive advertising tools, including Burger King, Saturn, Discover Card and Kraft, Mr. Roberts said. About 85 percent of the GSN interactive audience interacts with the commercials as well as the programming, he said.