By Peter J. Brown
Consumers want more control over their time and their content. Broadcasters are responding by making their content available on demand using a variety of distribution channels including DBS and broadband.
While the satellite industry knows the boundaries well and accepts that true on-demand delivery is off limits, at least for now, the direct broadcast satellite players are nonetheless actively pursuing solutions. Direct-to-home operators are refining their near video-on-demand (VOD) technology such as advanced digital video recorders (DVRs) like DirecTV Plus and a portable solution from Echostar Communication Corp.'s Dish Network. Satellite radio also is ramping up its efforts, with both XM Satellite Radio and Sirius Satellite Radio continually expanding the capabilities of their portable players. "Consumers want control over what they hear in the car," says Ted Schadler, vice president and principal analyst at Cambridge, Mass.-based Forrester Research Inc. "... This is a very challenging environment in which to innovate and advance the business model."
At the same time, satellite service providers are trying to determine what broadcasters really expect and how far the broadcasters intend to go. In the first half of this decade, the satellite service providers successfully addressed the dual challenge of digitizing network TV feeds and upgrading their delivery capacity to handle the demands placed on them by the growing number of bandwidth-hungry HDTV channels. Now an uncertain on-demand agenda is emerging, and viable satellite solutions must be ready to serve this market as well.
"For the most part, satellite networks have been the backbone of the content distribution infrastructures for content delivery from content originators to downstream service providers," says John Delay, director of strategic management for networking solutions, Broadcast Communications Division, Harris Corp. "Recently, we have noticed a trend where traditional satellite and fiber operators are offering hybrid services, making it easier for operators to reach networks with a bidirectional network service offering,"
Satellite operators are finding that the highly competitive broadband environment is playing into their hands with respect to enabling a quicker rollout of on-demand services, among other things. "The fast paced growth in bandwidth and reliability, as well as the competition between the various high speed Internet providers, is providing a reliable backbone for satellite operators to offer such services," says Shahar Bar, manager, broadcast & satellite solutions marketing, at Harmonic Inc.
With Internet Protocol-based TV (IPTV) looming larger and larger as an entertainment delivery option, especially outside North America, the U.S. broadcast TV networks are finally realizing that the existing linear television experience is becoming less attractive to a new generation of viewers, says Aditya Kishore, media & entertainment strategies analyst at the Boston-based Yankee Group. "While any transition from the existing TV value chain will be a slow one, they do need to start developing a strategy," he says. "They are starting to experiment with iPod downloads, free VOD on cable and DVR downloads, as well as distribution via their web sites and via aggregators such as Yahoo and AOL. The challenge remains the business model. How do you develop a revenue stream that can support production and distribution costs?"
The broadcast stations are lagging behind, according to Kishore, who describes their predicament as "trying to put the genie back in the bottle. I have yet to see any clearly defined strategy to deal with broadband and on demand from the TV stations," he says.
The major networks are rolling out on-demand content, and they realize that the audience is changing and simply wants more flexibility. The networks "need to make sure that we are where are consumers are going to view our content, says Albert Cheng, executive vice president, digital media, at Disney-ABC Television Group. "On demand helps us reach consumers that may have missed one show but would be able to jump right back into our linear broadcast the following week, so they won't miss a beat in a story line."
CBS also is exploring VOD, making its first deal with cable provider Comcast because of tremendous market overlap, says Martin Franks, executive vice president for policy, planning, and government relations at CBS Corp. "Is it a real market or a real product? We are tired of hearing all the speculation, and we have decided to test VOD with four of our best shows," he says. "We will find out if it is a valuable product or not."
Franks believes that the advent of VOD will strengthen, not weaken, broadcast TV. "We have heard all the predictions of the demise of broadcast network TV. We see VOD as building and extending network TV, not cannibalizing it. This is not the end of network TV, not even close," he says. "One night during the recent sweeps, one of our hottest shows, NCIS, achieved a 17 share. That means that for that episode that week, 83 per cent of the available audience would have been ripe to watch it via VOD."
The driving force behind CBS's deal with Comcast was market overlap, says Franks. Of Comcast's 22 million homes, 12 million are in markets where CBS owns and operates TV stations. CBS remains open to doing VOD deals with the DTH operators, but "there are issues involving how much capacity is in the home, and although I am sure that DirecTV is offering an elegant solution, their box that will make VOD possible is just now coming onto the market," says Franks.
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