The More They Know

Consumer education is key to VOD use

Results of a soon-to-be-released study by Beta Research conclude that 67% of cable subscribers are familiar with VOD.

That's the good news. The bad news is that most potential and existing customers need a refresher course on where to find it and what programming is available. And they need a reminder that most content is free.

Page Thompson, senior VP/general manager of video services at Comcast, says, “We have learned that there are a few key messages you have to communicate to the customer. The first is that, if you have digital cable, you have On Demand. The second is that you have to go to channel 1 or push the On Demand button on your remote. And the third is that there is a huge amount of content that is free, because initially customers did not understand how much of this content is free.”

That's the same message other cable executives are trying to relay. “We were relaunching VOD with additional content last year, so in mid 2005, we created three cross-channel spots, as well as radio and print [campaigns],” says Bob Nocera, director of new video services at Cox Communications. “It's really to drive what is available and where to find it. Those are the two major messages we have.”

Cable operators are heavily promoting VOD because the industry hopes on-demand content can stem subscriber losses to direct-broadcast-satellite (DBS) services like DirecTV. DBS has been stealing customers away from cable for years, but it's not equipped to offer a very compelling form of VOD.

So while PricewaterhouseCoopers (PwC) last month projected that cable TV will lose about 1 million customers each year through 2010, it also predicts that digital cable, which is coupled with VOD, is rapidly growing and will surpass analog in 2008. Digital will have 35 million subscribers at that time compared with analog's 30.5 million.

Forrester Research estimates that one out of 12 households currently uses VOD. And Bruce Leichtman, president/principal analyst for Leichtman Research Group in Durham, N.H., estimates that, even with all the free VOD out there, about half the VOD programming viewed is content from premium channels like HBO, where viewers can watch programs on their own timetable.

Revenue from VOD has more than doubled in the past two years, to about $1.45 billion, according to PwC.

None of the major ad-tracking firms measure how much cable operators are spending to advertise VOD. Comcast, the nation's largest cable operator, sends out 2 million bill-stuffers and hundreds of thousands of direct-mail pieces a month.

Says Thompson, “Every month, Comcast runs cross-channel spots promoting on-demand content valued at several million dollars.”