Parks Associates Blog

Monday, February 25, 2008

Cable's Big Carrots

It's hard to feel all warm and gushy over the cable operator, particularly on a day like today. During a hearing Monday at Harvard Law School, MSOs (and Comcast in particular) came under fire yet again from the FCC for "network management" - slowing (and in some cases blocking) certain kinds of Internet traffic. The hearings brought to light the cable industry's habit of carrying big sticks in an attempt to solve some prickly problems it faces, particularly bandwidth management. It also gave the FCC more ammunition in its arguments for enforcing net neutrality.

At the same time that the cable operators are getting beat up for their perceive punitive actions, what I find exciting are some of the new applications that the operators are putting forth in an effort to - today - fend off the increasing challenge of DVR use and ad-skipping and - tomorrow - the "over-the-top" broadband video threat.

Today's New York Times indicates that Cox Communications and ABC have reached an agreement to establish an on-demand video service that would allow viewers to watch ABC shows like Lost and Desperate Housewives any time they choose - up to four weeks. The catch in the service is that ads displayed during the programming cannot be skipped. Time Warner Cable's well-publicized Start Over - which the operator wants to implement across its systems by the end of 2008 - allows viewers to begin watching a show (and they have dozens) at any point during the broadcast. A newly-deployed feature called Look Back allows viewers to see any show in a 24-hour period.

What the early experiments with online video have taught content producers and networks is that consumers don't mind ads, as long as they're limited. In fact, the networks are reporting significant bang for the buck in distributing ad-supported online content. We assume that they will continue to push on-demand and "catch-up" services as means to provide 1) more convenient services to their customers; and 2) mitigate the risk of DVRs, online video, and of course their competitors.

And the operators certainly have a significant carrot to pursue here. Our own estimates (from our newly-released report New Advertising Platforms and Technologies indicates that only 10% of free VoD streams are being monetized through ad-support. We estimate that 38% of such streams will be monetized by 2012. This leaves a significant opportunity for the operators to put out more compelling on-demand content and attach advertising to it.

0 Comments:

Post a Comment

Links to this post:

Create a Link

<< Home