New Orleans — Despite a landmark video-on-demand deal struck last week between Paramount Pictures and In Demand L.L.C., several obstacles remain before cable operators, programmers and studios can finally find common ground when it comes to emerging digital services.
Among them: creating business models that benefit all of the players, and leveraging copy protection measures that adequately secure the best content the studios have to offer, according to Viacom Inc. Senior Executive Vice President and Chief Financial Officer Richard Bressler, Thursday's keynote speaker at the CTAM Digital Conference here.
Although negotiations between operators, programmers and studios have become rather testy as digital distribution entered the picture, working jointly on solving those business issues should be a priority for all involved because "interests in the digital world are more aligned than they are opposed," Bressler said.
Though Viacom-owned MTV Networks already is in discussion with cable operators about possible VOD distribution deals, don't expect "free-on-demand" to enter the lexicon.
Bressler said he understood that FOD, from an operator's point-of-view, could be wielded to boost digital adoption and reduce churn, but believes the concept is flawed because the programmer gets little to nothing in return while potentially undervaluing the programming assets.
FOD, despite being "free" to the digital customer, still requires the programmer to dole out money to market and package it, he added.
Bressler also was critical of operators that don't charge something extra for subscription-VOD packages, citing internal research that indicated consumers would be willing to pay as much as $11 per month for the SVOD component.
In a follow-up panel, Starz Encore Group LLC President of Distribution Que Spaulding agreed with the assessment that SVOD should not be offered as a simple value-add, but suggested a strategy in which the price of the on-demand piece is bundled in, rather than parted out.
Bressler also warned that peer-to-peer applications will harm the business models of MSOs and content providers alike. "Our content is at risk; your business model is also at risk," he said.
By way of example, Bressler noted that consumers would think twice about paying for premium networks such as HBO and Showtime if pristine copies of popular originals such as "The Sopranos" and "Queer as Folk" were allowed to roam the Internet unchecked.
Though downloading content via P2P applications remains "cumbersome" today, it won't stay that way for long, Bressler said, calling attention to the forthcoming rise of MPEG-4, a video compression technology that renders high-quality images at lower bit rates than its MPEG-2 cousin. MPEG-4 "is the MP3 of video," he said, referring to the digital compression format made famous by Napster and its file-swapping knockoffs.
Bressler also applied the microscope to digital video recording technology, offering the latest in a string of warnings from programmers that DVR ad-skipping and zapping capabilities could throw traditional models into chaos, and force programmers to recoup those costs in other ways, including higher affiliate fees.