Network executives say VOD is more complicated, citing affiliate agreements clearance rights. Cable networks, for instance, often use VOD fare as a hook to obtain carriage for smaller sibling digital networks.
So far, CBS and NBC are the only broadcast networks that have placed meaningful VOD bets, but advertisers want more because it could be a big boost for a medium that needs a breakout success story.
NBC offers "Law & Order: SVU," "Law & Order: Criminal Internet," "The Office" and "Las Vegas" on Comcast and Cablevision for 99› and will add "Friday Night Lights" to Comcast in the fall. Time Warner Cable also carries some prime-time shows. "We aren't cutting deals just with YouTube. We are also going to our primary clients," says Megumi Ikeda, VP-strategic initiatives and new media for NBC Universal Cable.
NBC's parent company NBC Universal has inked deals for cable network content, but the economics are more challenging for broadcast fare because of the costs. Still, NBC will test free and fee-based models, and hopes to begin inserting ads in broadcast content this fall, Ms. Ikeda says. NBC has worked with General Motors Corp. for prime-time content and with Visa, Lowe's, Apple and eBay for cable network content.
CBS is offering episodes of "CSI: Crime Scene Investigation," "NCIS," "Survivor" and "The Amazing Race" on Comcast for 99›. Verizon plans to offer the same shows for free on its video service. In May, Comcast and CBS struck a deal with General Motors to sponsor the "Survivor Finale" on-demand for free.
Martin Franks, exec VP-planning, policy and government affairs at CBS, says he'd do deals with other cable operators, but so far Comcast has been the most aggressive. "Comcast is compensating us for carriage. I won't tell you how the 99› gets split, but we wouldn't do it for free," he says.
Broadcast fare is sparse on VOD because networks have devoted their attention to online delivery and streaming through venues such as iTunes, Google Video, ABC.com and CBS' Innertube, says David Ernst, exec VP-director of futures and technology for media agency Initiative.
Negotiations don't happen quickly for VOD product. Rights issues are one of the main impediments to providing content for the VOD platform, says Paul Rule, president of VOD research firm Marquest Research. Traditional licensing agreements do not usually provide for ancillary uses such as VOD or streaming without further negotiations with the rights holders.
But the relative dearth underscores another truth about VOD: It doesn't command a tremendous audience yet and has yet to yield a breakout success like basketball's March Madness was for online. "There have been many false starts in VOD," says Mr. Ernst.
While VOD is now in 25 million digital-cable homes and 60% of all digital-cable subscribers have used VOD, up from 25% two years ago, only 4% of all TV viewing comes from recorded DVR programs and VOD content, according to Leichtman Research Group.
Other issues hamper VOD. The medium needs better navigation, more precise measurement and pervasive ad insertion so ads can be updated on the fly, says Tracey Sheppach, VP-video innovations director at Starcom USA in Chicago. Starcom clients Kohler Co., Kellogg Co., Miller Brewing Co., Coca-Cola Co. and GM have participated in VOD.
Still, advertisers are willing to sign up for the medium. "On a purchase decision as significant as a vehicle, consumers are seeking as much information and content as they can get," says Paul Edwards, GM director of media operations, in an e-mail interview. "VOD offers us the opportunity to offer significant value in the shopping process."
"VOD is a platform that plays a role in the way we connect our brand, which is about empowerment, flexibility and control, with our consumer," adds Manning Field, senior VP-branding and advertising for Chase Card Services, which has advertised in various VOD content. "When you think about both the promise and the delivery of the VOD offering, it's a very natural place for us."