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Are Rental Consumers Warming to the Cable Company?

26 Jan, 2010 By: Stephanie Prange

Back in 1993 cable video-on-demand seemed poised to kill the video rental store. During the Bell Atlantic-Tele-Communications Inc. merger that year, Bell chief Raymond Smith declared that video stores would be “no longer viable” in five years. Well, 1998 rolled around and video stores were still alive and kicking. Even today, more than 16 years later, the habit of renting a physical good hasn’t gone away, though it occurs increasingly by mail or through a kiosk.

And what of cable VOD?

Well, it’s certainly picked up, boosted by the gift of day-and-date releases with disc. Total VOD growth was 63% in the fourth quarter of 2009 compared to the year before, and up 20% in the previous three quarters, according to data from DEG: The Digital Entertainment Group. Combined spending on VOD and electronic sellthrough was up 32% to $2.1 billion in 2009, according to DEG.

Cable VOD is certainly a growing part of the business, but companies such as Redbox, Netflix and Blockbuster create the lion’s share of rental transactions, increasingly through the Internet.

Cost may be one of cable’s drawbacks. It’s certainly more per rental than Redbox and Netflix. But what it offers in convenience one would think would overcome that downside.

Another problem I think is image. Recently, we had a recurring problem with channels on our system not showing up. The technicians were very nice the several times they came to our house to “fix” the problem (it finally fixed itself). Still, with nowhere else to turn but satellite and our bundled phone and Internet with the cable company, we felt powerless. Many years ago, I remember ordering a pay-per-view showing from my cable company that never showed up. These experiences color consumers view of their cable company.

Don’t get me wrong. I don’t hate my cable company. In fact I think they do a pretty good job, and I enjoy our cable service. But because we already pay our cable company $90 a month (about $1,000 a year), spending $4 or $5 more per rental on top of that bill makes it a real shocker, especially in this economy. I probably wouldn’t remember paying $4 to rent a flick at Blockbuster. That monthly cable bill, too, may be a drawback.

The technology has gotten better, but it also could be improved. A TV remote isn’t exactly my favorite way to navigate. In fact, to make that easier, Cablevision last year launched an interactive tool that allows its iQ TV subscribers via the remote control to more easily find on-demand movies and TV programming. Pressing the “C” button on the remote control allows customers to use a virtual keypad to enter in search terms and quickly find programming based on a show's title, genre, performers, network or other attributes.

And then there’s the competing channel of the Internet. Cable companies are trying to ameliorate the Internet effect with initiatives such as TV Everywhere, under which consumers who subscribe to cable can get the same content on the Internet. Those moves seem to be going in the right direction, and if cable customers who rent a VOD movie could stream it again via the Internet in a certain window, that might make the service more desirable as well.

Ultimately, it’s kind of a mystery to me why cable VOD hasn’t been a bigger player. I guess many consumers unconsciously understand and value something they can hold in their hands and like perusing the aisles, looking at their Netflix queue or visiting the kiosk at the local grocery store. It may all come down to a matter of habit — but habits do change.

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