SeaChange International has wandered into the untapped commercial waters of video-on-demand via the introduction of a system capable of placing digital advertisements on VOD systems.

The company's Ad Placement System enables operators to change spots and promotions automatically and help advertisers craft their messages for specific parts of the day or viewer demographics.

The system has three primary components: an ad management system that centralizes control of ad placement and rule settings, task controllers that automatically transcode the appropriate spots, and a splicer that inserts the ad into the digital stream.

VOD buy-rates remain suspect (cable operators don't release those figures yet), but the addition of targeted advertising could open up a potentially lucrative revenue stream as MSOs continue to expand their on-demand libraries with "free" or ad-supported content.

Offering "zip code plus four" precision, the system, by way of example, is designed to send a compact car ad to a "downtown" demographic and a luxury car commercial to people who live uptown.

SeaChange also anticipates that ad-targeting will curb the urge for viewers to fast-forward through commercials.

"Through software automation, advanced digital encoding techniques, and sophisticated splicing technology, we've married the benefits of 'personal television' with the messages being delivered by networks and sponsors," said James Kelso, SeaChange's general manager of broadband systems and vice president of marketing.

SeaChange plans to show off the system at next month's National Show in New Orleans.