iPod: TV’s Odyssey: Satellite Isn’t Stellar in VOD

Oct 9, 2006  •  Post A Comment

Digital technology that lets viewers watch network programming when they want may hurt satellite television providers in their competition with cable operators, analysts said.

Comcast, the biggest cable operator, boasts of billions of views of its free video-on-demand content, which this season includes eight shows from CBS: “CSI,” “CSI:Miami,” “CSI: NY,” “Survivor,” “NCIS,” “Numb3rs,” “Jericho” and “Big Brother.” The ability to offer video on-demand is an advantage provided by cable’s two-way infrastructure, which allows customers to communicate directly with video servers at the cable headend.

Satellite providers are looking at options to provide a similar service. “Their solution right now is to roll out DVR boxes that have a partitioned disk,” said Derek Baine, senior VP at Kagan Research. The satellite providers use a portion of the memory space on the digital video recorder disk drive to store popular content so subscribers can view it when they want. The DVR companies must replace and update that programming or the disk will overflow.

“That will be their solution short term,” Mr. Baine said. “Longer term, they definitely need a more robust broadband platform.”

Despite the problem, Kagan projects that satellite will increase its share of the multichannel market slightly over the next 10 years. Cable’s share will slip to a 61.6 percent share in 2015 from 69.6 percent in 2005, the company predicts. And the telcos, which are beginning to roll out their services, will grow from 0.1 percent in 2005 to 8.7 percent of the market in 2015.

David Card, an analyst at Jupiter Research, thinks cable is in good shape in the face of its new competitors from the phone companies and from other forms of television carried over the Internet.

“I think cable’s in good shape here,” Mr. Card said. “The Internet is not optimized for broadcast. It’s optimized for a lot of one-to-ones.” He’s not sure the Internet can handle a large volume of filmed content moving through its pipe.

Mr. Card also doubts that the phone companies can win by offering better technology. “If you just ask customers in the near term what they want, it’s not super-advanced features but cheaper cable or cheaper satellite,” he said.

Mr. Baine said the telcos’ superior technology faces other market obstacles. For one thing, they might be entering the market too late. “Multichannel penetration is already so high that really you’re talking about a zero-sum game, and when it comes to that I think a lot of the battle is going to be fought over price, which is not really good for anybody,” he said.

Internet TV also faces quality issues, Mr. Bain said. The picture on shows distributed by streaming just isn’t as good as its cable counterparts. “HD consumers are going to watch prime-time shows in HD,” he said, “so I think the quality is going to be one of the factors.”