VOD Sea Change

Jul 10, 2006  •  Post A Comment

In a move that nudges the video-on-demand business in the direction that experts claim it must go to succeed, Scripps Networks has revamped its VOD strategy to offer up primarily its top-rated shows on-demand, rather than library content.

To support this new VOD programming approach, Scripps plans to kick off its first national VOD promotion later this week.

Both moves represent a big change for VOD in general and for Scripps in particular.

Like most ad-supported cable networks to this point, the Scripps family of channels has largely offered utility player library fare on VOD rather than its most popular first-run shows.

VOD analysts and experts have long urged networks to deliver their current and top-rated content. But many networks have bristled at that suggestion, citing uncertainties regarding measurement and the business model for free VOD.

Now that advertising has crystallized over the past year as the financial underpinning for ad-supported networks’ VOD offerings and broadcast networks such as CBS and NBC have dabbled in VOD with their top-tier fare, cable networks are starting to follow suit.

Offering more popular programming should improve VOD usage rates, which means Scripps can charge more for the ads in its VOD content. Scripps said its VOD ad inventory is consistently sold out.

Scripps, which counts HGTV, Food Network, DIY and Fine Living in its VOD portfolio, is among the first cable programmers to experiment with this “best of” strategy.

The company’s new strategy aligns Scripps with premium channels. HBO, for instance, has used VOD to showcase marquee content such as episodes of “The Sopranos” or “Entourage” the day after their cable run. The approach has been well-received so far by audiences.

While Scripps may not be the first cable network company to explore the best-of strategy, the marketing might it’s putting behind the new VOD approach represents one of the biggest commitments to VOD promotion that any network has made.

In the campaign, Scripps will send targeted e-mail newsletters to Cox, Time Warner and Comcast customers encouraging them to watch Scripps VOD content for the opportunity to win money.

Scripps has been a leader in the new media space. It was one of the first programmers to offer VOD content, and also developed a broadband video strategy long before it was commonplace.

The new shape of VOD has grown out of the marketplace reality of VOD, which is considerably different from the original expectations for the programming services when it launched five years ago.

At first, many programmers expected to serve up vast storehouses of content to meet every whim and desire of viewers.

“We used to think initially that VOD might be used like a library,” said Doug Hurst, Scripps’ senior VP of on-demand and affiliate marketing.

However, that longtail vision has not emerged for VOD. Instead, it’s been co-opted by the Internet, which has the shelf space for deep libraries of content.

Scripps in particular has been on the cutting edge in the broadband video revolution and has introduced three channels to date, including HGTVKitchendesign.com, which generates about 1 million video views per month.

With those twin forces at play — the growth of broadband as a repository for content and the emergence of VOD as a playground for a best-of entertainment experience — Scripps began the retool in May.

The new VOD fare includes episodes from the current season of the highest-rated series from each network, rather than genre content, such as kitchen makeovers, for instance.

A New Approach

VOD needs a new programming approach, as viewers are losing interest. In April, VOD research firm Marquest Research found in its third annual VOD study that usage in homes with digital cable had declined from 88 percent in 2005 to 65 percent this year.

“What is disappointing is the VOD offerings of most of the ad-supported networks, you get there and what’s there is not all that good and not all that recent,” said Paul Rule, president of Marquest Research. “This is what is starting to disillusion some viewers who are getting their first taste of VOD. After a month, they have run through everything in there.”

That’s why networks are tinkering with different approaches. Many are still in the experimentation mode with VOD, broadband video and iTunes, said Bruce Leichtman, president of Leichtman Research Group.

“We will see more experimentation from networks over the next year so that they can see what works best — and ultimately what is most profitable,” Mr. Leichtman said. “That said, ultimately it can’t be too helpful if all you’re putting out is second-tier content while others are putting out higher-profile programming.”

The Scripps promotion is a big step forward for VOD too.

So far, programmers have been hamstrung in promoting VOD because it lacks a national footprint. VOD is in about 25 million digital cable homes, according to Leichtman. Though relatively large, those 25 million homes aren’t a wide enough swath for national promotion.

After all, promoting VOD on-air would mean delivering a message to millions of consumers — especially viewers with satellite service — who can’t access VOD.

The Scripps promotional strategy bypasses this problem. The media company will match its newsletter database with that of Cox, Time Warner and Comcast subscribers to promote a VOD tune-in sweepstakes. Scripps has a hearty newsletter business, sending about 63 million opt-in newsletters each month. From that base, Scripps expects to send 6 million to 8 million unique newsletters to overlapping consumers weekly for four weeks, promoting previews of VOD offerings from HGTV, Food Network, DIY and Fine Living, and will conduct daily drawings for a $200 prize. The grand prize is $5,000.

Mr. Hurst hopes the watch-and-win promotion will entice new users to sample VOD.

“Overall, we definitely need new users,” he said.