Forrester projects the number of VOD-enabled homes will tip 28 million by the end of the year; it's a dance broadcasters are letting cable lead.
Over the summer Oxygen launched two VOD-only networks; VH1 used the medium to snag a record audience for its premiere of "Hogan Knows Best"; MTV2 aired a preview of "Nike Battlegrounds" on Comcast and Charter's On Demand systems a week and a half before its Sept. 18 premiere on the linear network; and Rainbow Media on-demand pioneer Mag Rack released its first branded VOD programming.
TV OF THE FUTURE
"I have every reason to believe this is the way people will watch TV in the future," says Cathy Hetzel, senior VP-On Demand Essentials for Rentrak, which measures VOD usage. "It continues to grow every month."
When VH1 readied the midsummer launch of VH1 On Demand, it decided to use the platform to promote its new series, "Hogan Knows Best," an "Osbournes"-style reality show following Hulk Hogan's suburban family life. The Viacom-owned cabler made the premiere episode available to Comcast's 9.1 million VOD customers a week before its linear debut. Mr. Hogan starred in Comcast promos heralding the arrival of VH1 On Demand and Comcast produced tune-ins publicizing the show's premiere date.
The first airing on VH1's linear network snagged 1.9 million 18-to-49-year-old viewers, the most ever for a VH1 series premiere. While there are no hard numbers correlating the effect the VOD promotion had on the premiere's ratings, VH1 executives were encouraged enough to consider doing a similar deal in early 2006.
TV networks are wrestling with the question of just how much content to offer on VOD-can too much cannibalize the network's Nielsen-rated audience? After all, how many Comcast customers watched the premiere on VOD instead of on VH1? It's not a question easily answered.
Ben Zurier, VH1 senior VP-programming strategy, says for an ad-supported TV executive, the idea of VOD takes some thought.
"When you become a true VOD believer-and it takes awhile because a lot of us are TV execs who believe if people aren't watching you then whatever they are watching is a competitor-a light goes off," he says. "You say, `If they aren't watching VH1 this instant, the behavior they're engaged in through VOD will lead to substantial viewing in the future."'
VOD has become a convenient home for the material that doesn't fit on the linear network-such as behind-the-scenes clips and extra footage. Mr. Zurier says VH1 is concentrating on content that will "encourage folks to touch our business more frequently."
Over the past year Comcast and its counterparts have pushed smaller networks to test the waters via VOD before the cable operators sign them to distribution agreements. Lime, AOL founder Steve Case's healthful living network , for example, will start its life on Time Warner Cable through VOD. Lime also includes a 24-hour channel on Sirius Satellite Radio
Some cablers are deliberately creating VOD-only networks. Oxygen Media, for example, created its Oh! Baby and Air Karaoke networks exclusively for VOD. Oh! Baby also airs as a Saturday morning programming block on Oxygen's cable network, but Oxygen execs insist it is at its heart a VOD net, and there are no plans to build it into something linear.
REFRESHING 20% EVERY WEEK
Oh! Baby's program lengths range from the more traditional half-hour shows, such as "Oh! Baby, You're on TV" hosted by Molly Shannon, to 5-minute "apParently Speaking" vignettes of parenting advice, to a 3-minute anecdotal "Parentology" pod. Every week the network refreshes 20%-25% of the programming, which typically has a 28-day life span. The network, launched in June, isn't currently ad-supported, but Oxygen says that's in the long-term plan.
Similarly, Rainbow Media's Mag Rack and Sportskool-at 4 years a pair of mature VOD players-craft programming exclusively for VOD and are looking to adopt an ad-supported business plan in late 2005-06.
The challenges for VOD-only players are a bit different from those with linear presences. They have to, for example, build their identities from scratch and help viewers see their VOD-only networks as destinations. Mag Rack does this by running promos just prior to its VOD stream and launching promotional campaigns around major original programming initiatives, such as its recent 20-part original series from Regena Thomashauer's "Mama Gena's School of Womanly Arts."
In April, Mag Rack dabbled in branded entertainment through a co-production deal with Details magazine that produced an original short film for VOD featuring two Details advertisers, Bombay Sapphire gin and Jean Paul Da'mage jeans.
The boy-meets-girl story line ends up in a bar with not-so-subtle product placements, including a plug for the denim via a Details editor.
The show affirmed Mag Rack's desire to build advertising into its VOD business model.
"Viewers come to our network to escape advertising's intrusiveness," says Dan Ronayne, senior VP-general manager of Mag Rack. "But sponsorships, putting :30s upfront and behind the content and incorporating the branded entertainment approach where there's an affinity between the product and the programming, those can work."
As for how the revenue would be sorted between the cable operators and the content providers, it's too soon to determine what kind of arrangement would pan out, says Mr. Ronayne, but "there might be some sort of sharing model."
Marketers are beginning to get into the VOD mindset, agency buyers say.
"Advertisers are starting to think of what they produce more of as content than as a straight ad campaign," says Matt Rotundo, senior VP-cultural integration for Tag Ideation, a division of McCann Erickson Worldwide specializing in young adult marketing. "What's exciting with VOD is the opportunity to create content that can be deployed in interesting ways and at different lengths," he says. "[VOD operators] are open to involving brands" in their VOD fare.
Everyone in the industry agrees the Rosetta Stone will be figuring out that elusive VOD ad model-but there are three hurdles to doing so. One, there needs to be an economically efficient ad-insertion model so agencies don't have to deal with a half-dozen different cable operators to make a national VOD ad buy. Cable operators must sort out the data-sharing and privacy issues that will deliver demographic measurements to advertisers. And, finally, content providers (a.k.a. the networks) and the cable operators need to strike a viable commercial agreement.
One company working to make it easier for advertisers to buy into VOD is Atlas On Demand-a division of interactive media company aQuantive. It hopes to do for the nascent VOD market what aQuantive pioneered for the Internet-provide a suite of digital ad management and trafficking tools. Scott Ferris, senior VP-general manager of Atlas On Demand, estimates the seeds of an ad-supported VOD model may begin sprouting in early 2006.
Whether that happens also hinges largely on what kind of data content providers and advertisers can squeeze out of the cable operators. Rentrak is working to both expand the number of MSOs that provide it with VOD usage data and increase the number of parties who receive that information.
"The next step is to get unique viewers, that's the Holy Grail," says Mr. Ronayne.
After a big premiere, viewership of Showtime’s "Fat Actress" tailed off. While Showtime denied it, industry watchers suspected viewers were migrating to the next-day VOD episodes