Declaration of In[ter]dependence
With subjects ranging from video-on-demand, to digital video recording, IP television and portable and mobile media, showgoers might have believed that they had stumbled into a conference that majors in widgets and technology.
But such was not the case in July at the annual CTAM Summit in Philadelphia, which drew record-breaking attendance of 3,376. Although new and emerging cable services served as primary discussion points, the panels, true to the aim of CTAM, covered their marketing and operational impact, rather than just the nuts and bolts of the technology behind them.VOD business models still evolving
Although video-on-demand (VOD) deployments and libraries continue to expand, the burgeoning service still lacks a definitive business model.
That was the consensus among panelists during a Multichannel News/B&C-hosted panel discussion.
For Time Warner Cable, growth is expected to come from all three VOD categories: "free" on-demand, subscription-VOD and more traditional "transactional" VOD, according to MSO Senior Vice President Bob Benya. No one category will serve as the "killer model," he added, noting that VOD continues to play an important role in the value of digital cable.
While the business models behind transactional and SVOD are fairly straightforward, much more contention exists between operators and programmers in the "free" category.
Programmers pay big bucks for content, so the economic foundation of that content and the VOD business must be supported, explained Ron Lamprecht, vice president of new media at NBC Universal.
Although Twentieth Century Fox Film Corp. owes its growth in the VOD arena to MSOs such as Comcast Cable, a free-on-demand pioneer, the content supplier initially was leery about the model, said Jamie McCabe, Twentieth Century's SVP of Worldwide Pay-Per-View. But that position has changed, he added, as it became clear over time that free content helped customers become more comfortable with the on-demand environment and transitioned them to "pay" titles.
Benya of Time Warner Cable maintained that "it doesn't make a lot of sense" for an operator to pay for the same content more than once. The MSO, however, is more "open minded" on that subject if the content in question happens to be new and unique.
Still, there are models emerging that will help to pay the freight on free VOD titles.
"Advertising is important to what VOD has to offer," said Scott Ferris, senior vice president & general manager of Atlas On Demand, a company that is bringing its experience in Internet advertising to the VOD world. He said ad agencies are attracted to the advertising aspects of VOD because it offers a more measurable platform than its linear counterpart.
There are already some early successes in this area. Comcast Spotlight, for example, recently teamed with ESPN to promote the XGames using the VOD platform. There, Comcast and ESPN assembled three distinct advertising packages, offered them locally, and gave the sports programmer some valuable exposure, said Warren Schlichting, vice president of new business strategy at Comcast Spotlight.
Although advertising in VOD is still in the early stages, the coupling of advertising with video delivered over the Internet is readily accepted by consumers, according to Tom Ascheim, EVP and GM of Nick Digital TV. Consumers will listen to an advertiser's message, he said, if you give them something they want in return.
Programmers, meanwhile, are growing more interested in VOD as the costs of encoding content, transporting it and storing it continue to drop, but are not yet ready to put all of their resources into it.
"We think there is a business there," McCabe said. "A big business? I'm not sure."Breaking down IPTV
When dissecting the hype emanating from IPTV, it seems there's uniform agreement on at least one thing: it's not exactly the sexiest acronym to ever grace the realm of broadband.
IPTV is "a terrible label...a lousy term," according to Joshua Goldman, CEO of broadband video firm Akimbo.
Even those who have IPTV on the roadmap aren't exactly giving the term a ringing endorsement. "My opinion is that it's overblown," said Robert Ingalls Jr., president of Verizon's retail markets group. Although Verizon is using a QAM overlay for video services initially, it will migrate toward IP video over "a multi-year process," he noted.
There's also confusion in the market about what IPTV is, rather than just a catch phrase for so-called next-generation video services. Panelists at CTAM thought this question is better answered by explaining what it is not.
"It's not watching TV over the Internet," said Ed Graczyk, director of marketing for Microsoft TV.
It's also not about going all-digital, nor is it something that is necessarily better or cheaper than how cable transports digital video today, noted Dallas Clement, SVP of strategy & development for Cox Communications.
But IPTV is also an enabler that could wreak havoc on traditional cable business models, as programmers find ways to use high-speed connections to pipe their content directly to the consumer. That means the day of the "walled garden" may soon come to an end, said Akimbo's Goldman, noting that even the "poster child" of the concept, America Online, has even dropped its content walls.What about wireless?
Another key subject at the confab was wireless, a service that will help cable attain the coveted "grand slam" or "quad-play," or whatever term ends up sticking.
GCI of Alaska began reselling mobile phone service in the mid 1990s, and offers bundled billing for all of its telephony products, including traditional circuit-switched landline, according to company SVP of Corporate Development Richard Dowling.
"Today, wireless is about bundling," Dowling said, noting that churn dips much lower when cellular is combined with other GCI services.
Time Warner Cable has also entered the wireless game in Kansas City via a trial offered in partnership with Sprint Corp., but has discovered a very entrenched market. Of the market's 40,000 phone subs, 40 percent of them already were receiving cellular service from Sprint, said Dale Fox, the MSO's VP of digital phone.
Whatever strategy cable operators take to wireless voice services, they need to be sure that they have to offer a national service, versus one that is geographically bound, in order to be competitive with RBOC offerings, said John Garcia, Sprint's SVP of sales and distribution.
He also categorized the emerging mobile virtual network operator (MVNO) model as "over-hyped," because wireless services require a strong base of customers, a brand and plenty of IT expertise.
Because churn is dropping dramatically, wireless companies are now shifting their marketing dollars to retention, rather than acquisition. In that environment, operators must consider a strategy that adds value to an integrated service, Garcia said.
Rogers of Canada, with its 5.7 million cellular subs, is well ahead of other cable operators with mobile voice services, but is just getting started on the wireline side. On the latter, Rogers has found that the quality of the cable drop is key. "Marginal performance just does not cut it," said Timothy Wyllie, Rogers Cable's VP & GM, telephony.Portability plays
Sharing a symbiotic relationship with wireless is the concept of mobility—that is, the ability to offer content on mobile devices or to share content with multiple devices.
Mobile media is "integral to our strategy," said Debora Wilson, president of The Weather Channel Companies. In fact, her company has created a separate business unit just to optimize its presence there and to create unique content for the platform.
For a company like Idetic Inc., the developer of MobiTV, portable and mobile content is core to its business. The challenge has been what a cell user might pay for video content, noted Idetic Chairman & CEO Dr. Phillip Alvelda.
But one problem that continues to plague the mobile media sector is its myriad encryption systems. "Rights holders and manufacturers have not made that consumer proposition easy to execute," said Steve Jacobs, vice president of broadband alliances for Sony Corp., maker of the new Playstation Portable (PSP) gaming system.
Jacobs likened digital rights management (DRM) to the "moat, castle and fire-breathing dragon" between portability and ease of use. Still, he was optimistic that emerging consortia will enable various DRM systems to work together by late 2006 and into 2007.
For operators, crafting portability and mobility strategies is not if, "but how and when," said Arthur Orduña, vice president of strategic initiatives for Advance/Newhouse Communications.
He said cable must have a comprehensive view on the subject. "Some service sets have to be un-tethered," Orduña said.
Although The Weather Channel is keen on mobile services, supporting them can be a technical challenge due to the multitudes of carriers and mobile applications (WAP, SMS, etc.), Wilson explained.