VOD With Ads or Ask Consumers to Pay?

At Cable Show: Execs Consider On-Demand Models

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LAS VEGAS (AdAge.com) -- While the broadcast networks begin wrestling with how to handle new commercial-ratings data next week, the cable side of the table is still experimenting with all the ways to distribute its content.
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George Bodenheimer, president of ESPN

Photo: Bryan Haraway

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In a closing panel at the Cable Show in Las Vegas yesterday, George Bodenheimer, president of ESPN, and Patrick Esser, president-CEO of Cox Communications, discussed the heightened role video on demand will play in the next year and the new opportunities the medium can offer to advertisers.

ESPN and Cox announced a deal earlier in the week that will allow Cox customers to view certain ESPN content next fall on an on-demand basis the day after its initial airing with no ad-skipping.

'One attempt of many'
Speaking candidly of the new partnership, Mr. Bodenheimer said, "You have to generate revenue to continue to produce product, so that would be good if we could work that out. ... This is one attempt of many to look for business models going forward."

Mr. Esser added that the arrangement will help content providers determine whether consumers would rather view ads or pay for programming. "This is better understanding you as a consumer, so if we're putting advertising in front of you [it's helping us determine] which one you would prefer to have."

Earlier in the week, Stephen Burke, chief operating officer of Comcast Corp., hinted at a forthcoming deal with movie studios that would allow customers to watch movies at home the same weekend as their theatrical release for a premium price. Moderator Ali Vishni, business correspondent for CNN, wondered if such a deal could mean the death of studios, but Mr. Bodenheimer was quick to dismiss that notion.

Has become the norm
"Video on demand, that's what iTunes is," he said. "You want what you want and you take it; you pay for it. Two years ago that was considered revolutionary when ABC was the first network to put its first-run content on there and sell it. It upset various people and business partners in the chain, but it's not considered controversial now because everybody's doing it. I don't think there's any question that in some way, shape or form that on demand ... is coming."

Co-panelist Jeff Bewkes, chief operating officer for Time Warner, didn't comment on the conference's other big news story -- the arrest and eventual dismissal of HBO Chief operating officer Chris Albrecht -- but did lend credence to the belief that video on demand has the potential to develop a more sustainable business model for content providers.

"When people show up to watch 'American Idol,' they're watching it with ad support and that's the best way that network gets money for it," he said. "It's not really necessary if they want to watch it the next day because [Fox has sold] the episode. ... Why don't we just do what worked when everyone came and won a time share for this stuff? It doesn't mean you have to change it for ad support to having to pay."

And as far as investors are concerned, VOD has sound potential to continue to drive revenue growth. "I do sense we're terribly happy with where we are," said Jennifer Nason, director and global head of media and telecommunications for JP Morgan Securities. "It's good to talk about the VOD customer experience because it has to be good and it has to be tangible. Will cable operators choose to make bigger bets? Those are age-old issues still out there and unresolved to some extent. Some decisions will need to be made."
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