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Panel: Technology Isn't the Holdup in VOD

16 Apr, 2002 By: Holly J. Wagner

The technology to provide video-on-demand (VOD) is ready, but content provider structures and agreements on how to divide the spoils will delay widespread adoption for several years, a panel of entertainment delivery executives agreed today.

"As long as there will be a huge DVD opportunity for studios, it's very difficult to convince them to make [content] available to VOD," said Curt Marvis, CEO of Web-based Cinemanow.

In a panel discussion that brought together voices from the VOD, pay-per-view (PPV), set-top box and broadcast sectors, industry leaders predicted at least a five-year shakeout before the industry consolidates and makes VOD accessible enough for widespread adoption.

Packaged video will survive VOD as a sellthrough product, but providers want the rental window and will do all they can to persuade studios to give it up.

Andrew Wolfe, SVP and CTO at personal video recorder (PVR) maker SonicBlue, made no bones about his desire to open a VOD window day and date with the rental window and said content providers should look at revenue-sharing with VOD services.

"The real question is, why haven't studios jumped on this window themselves?" he said. "There is no scarcity of distribution any more."

VOD is more practical than packaged video for visual content providers because "in the music business, people build libraries. In video they don't," he said. "People don't watch the same TV show over and over again the way they play the song over and over again."

Movies and other programs consumers do watch several times are the niche for packaged media, he said. "They just go out and buy the DVD."

Marvis' biggest fear is that studios will rush to bring a flawed VOD model to the market and risk leaving consumers with a bad impression that will hurt other services.

Studios' efforts to eliminate digital piracy are misguided and destined to fail, panelists said.

"A lot of people are worried about digital piracy and are trying to sue the digital horse back into the barn," said Jonathan Taplin, CEO of VOD provider Intertainer.

"There is absolutely, positively not any way to keep people from pirating content," Marvis said.

Hackers have already cracked the code used in the first Replay TV set-top box, and SonicBlue will roll out an upgrade in about a month, Wolfe said, adding he doubts that much of the pirated content available has modern copy protection.

"Limiting the ways that people can enjoy content will not increase the market for content," he said. "Most people are honest and they will pay. They like all the services that go along with the purchasing experience."

That notion worries the media conglomerates, said David Katz, SVP of Strategic Planning and Interactive Ventures for CBS.

"Is their [VOD providers'] goal to become a media company and control the consumer experience?" he asked, noting that each layer of delivery like a cable company or PVR service distances content providers from their branding efforts. "There are so many links in the chain that can affect your message to the consumer."

Content providers are uncertain how their business models should evolve to generate the most revenue.

"We are the all-you-can-eat buffet of television ... [S]witching the audience to pay-per-view or subscription is the challenge," said Katz. "What is unclear right now is the future of another aspect of our business, which is syndication. We need to be sure we're not killing the golden goose."

CBS is testing what consumers will pay for, including marketing videos of programs directly to consumers who just watched a program like "Survivor" or a sporting event. CBS is also looking at extra content and how to package it, he said.

"We're looking at every opportunity," said Katz, the lone content provider representative on the dais. "We need to make sure that anything we're putting out there is not shooting ourselves in the foot."

Media conglomerates are utterly unprepared to shift to a subscription or PPV model, Wolfe said.

"It's likely that people have not been watching advertising for a long time," he said. "People have to pay for content, either with money or attention."

VOD providers can address that by offering either tiered subscriptions that let the subscriber choose the desired or tolerable level of advertising, ranging from advertiser-sponsored free broadcast to ad-free premium services.

The real obstacle to widespread VOD is consumer education about the benefits of broadband delivery systems, panelists suggested.

"The consumer is not yet really understanding what this is about," said Marvis.

"Our customers don't understand what old television is about," Wolfe quipped in response. "Our customers watch more TV than they did before they got a Replay [PVR], and they are demanding more content."

Marvis, whose Cinemanow delivers video over the Internet, offered some interesting insights into consumer viewing habits. Consumption from Cinemanow is about equally divided between streaming and downloads, although only about 10 percent of customers are watching its programming on a television set.

"It's going to end up taking a lot longer than anyone anticipated," Marvis said later. "The death of the video store has been greatly exaggerated, as it was five years ago."

Viant sponsored the panel, which was presented under the auspices of the Digital Coast Roundtable, a coalition of Los Angeles area entertainment providers.

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