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Video
on Demand
by
Rita Stankeviciute
What
Is Video on Demand?
The golden age for coach potatoes is starting. New technologies
make it possible for entertainment to find you instead of you
looking for it. Television stormed into people’s homes in
the middle of the 20th century and changed the lifestyles of many.
Now, in the digital era, television has even more chances to be
someone’s perfect roommate and to keep people on their couches.
Let’s imagine residents of Smalltown, USA driving to video
stores to rent a movie. Their television sets and a VCR are the
only form of entertainment for them. Rather frequently, they realize
that it’s time to watch a movie only after the video store
has closed or the weather outside was just horrible.
Now, their life has changed. The person can turn on the TV and
by using only the remote control, pick a variety of movies or
programs, which they can pause, stop, forward or rewind. There
is no longer any need to leave a cozy home, start the car and
go to rent a movie. Gone are the days when programming a VCR was
the only way to record your favorite TV show when you weren’t
at home.
The digital service called Video On Demand (VOD) now allows subscribers
to get a digitally perfect picture on the screen in just a moment
with the help of only a remote control.
While many people in the world are still unfamiliar even with
the old pay-per-view television system, for more than 10 years
Americans have tried to change it because movie starting times
and ordering methods seemed to be inconvenient. With the rapid
expansion of high-speed broadband connections it became possible
to offer new ways of watching television. The VOD-type service,
which allows people to better control their TV watching agenda,
has been around since the early 90s but only now is starting to
become a mass media habit.
In the following presentation you will find out how and why the
number of couch potatoes in the States is growing, and what is
the future of the business that doesn’t force consumers
to leave their living rooms.
How Does It Work
Video on demand service requires powerful computers, switching
technology, and high-speed fiber-optic cable lines.
In order for the VOD service to be available, the client must
upgrade to broadband cable, wireless or telephony so video service
providers can respond to on demand requests from users at home.
Using high-speed digital channels can providers can communicate
directly with home viewers delivering the content people want
when they want it.
Figure 1 explains the concept of VOD:
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At
one end, there is a video server, which acts as repository
of digitally stored information. At the other end, there
is the set-top unit, which may reside inside a personal
computer (PC) workstation or act as a stand-alone unit next
to a television set in someone's home. The set-top unit
typically incorporates a digital decompression engine or
decoder. Users can access and interact with video material
residing on a video server through a keyboard or mouse on
a PC, or a remote control device which relays the appropriate
control signals from the set-top unit to the video server.
[1]
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Figure
1 Conceptual View of VoD |
It
seems that the development of new technologies will not stop anytime
soon. So, the way households receive better quality videos on
demand should improve. Industry professionals are optimistic and
the forecast is for improved capabilities for VOD technologies.
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With
consumer acceptance and interest in digital video recorders
growing, cable operators must make the business of VOD work,
too, especially since it's a service that satellite, which
has championed DVRs [digital video recorder], can't offer.
When VOD is coupled with a DVR, the combo is much more appealing
and is one that cable can play as its trump card. [2] |
Video
on demand services can vary. There is subscription video on demand
(SVOD), where for a monthly fee subscribers get as much VOD as
they want. Another possible way of offering programming is Free
VOD. In this case subscribers access selected programs among cable
channels.
Background
The past decade has seen the emergence of VOD technology. The
birthplace of commercially viable VOD service was Hong Kong where
VOD started around 1990 but didn’t succeed:
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The
technology was not mature, Video CDs were much cheaper, and
pay TV was not common in Hong Kong. Hong Kong Telecom lost
a large amount of money and the service was shut down after
it was acquired by Pacific Century Cyberworks in 2000.[3] |
The
start of VOD in USA was also slow. In June 1992, The Competitiveness
Institute (TCI) together with long-distance telephone company
AT&T and local telco US West started a trial of the predecessor
to VOD, “Near video on demand.”
In
Denver, 300 households participated in the trial. Consumers “could
request by telephone movies from an on-screen guide and view them
at staggered starting times of every 15 minutes.”[4]
During the two and a half year trial period people got so used
to it that they ceased renting movies from video stores.
Video
on demand became a phrase that drew huge attention from the media
and the scientific community. In 1993, U.S. News & World Report
for the first time tried to understand how the system worked:
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The
new system will work this way: Thousands of movies will be
digitized and stored in vast arrays of memory disks on mainframe
computers called video servers. In order to conserve space
on the disks and during transmission, the films and other
programs will be squeezed mathematically to a tiny fraction
of their original size, doing to digital information what
orange juice processors do when they remove the water, ship
only the pulp and add the water back in at the other end.
… Customers will be able to interact with the system
to design their own lineup of shows. They could, if they wished,
watch a week's worth of soap operas, one after another, then
play an exercise video.[5] |
A
year after this article VOD became a reality. Time Warner offered
“switched digital interactive multimedia services using
a hybrid fiber/coax network” [6]in Orlando, Florida.
The customers could choose movies from a library of 100 titles
anytime they wanted, with the capabilities of stop and rewind
all at a cost roughly equal to video store rental prices.
Unfortunately,
delivering video on demand with VCR-like features was expensive.
In the middle of the 1990s video-server systems could cost $5
million, high-powered set-top boxes $6,000 apiece, and digitizing
a movie another $4,000. At the time, VOD required too much bandwidth
for ordinary phone lines, or even coaxial cable, and needed to
be transmitted by fiber optic cable.
The service didn’t bring enough revenue, and costumers did
not use the interactive services, most likely because these new
technologies were often confusing. A survey in 1994 showed that
respondents voiced a lot of cynicism about the “500 video
on demand channels offering programs that can be ordered to start
any time. The response to that question is often a smirk.”
[7]
For many years, the VOD was the unfulfilled goal of the industry.
VoD
in Your House
It
wasn’t long before the landscape of the television industry
radically changed. By 1998, writers were saying, “notions
of subjects on demand, interactivity and video streaming have
been accepted as a result of widespread use of the Internet.”
[8]
With new technological opportunities springing forward, consumers
looked elsewhere if cable companies were not offering interactive
capabilities. The development of broadband helped the TV companies:
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With
declining equipment costs, great leaps in storage capacity,
the greater penetration of digital set-tops and the ability
to outsource, the management of interactive networks and the
hosting of new services has become more viable as options
for cable providers.[9] |
By
the end of 1999 Time Warner Cable launched its first full-fledged
VOD service in Hawaii. By 2004, the other monster cable multiple
system operator Comcast was offering a full selection of VOD services.
The
number of digital cable costumers continues to grow each year
and so the VOD consumers are multiplying. VOD was ordered by these
percentages of cable TV viewers:
-
22% of cable subscribers
-
34% of premium subscribers
-
35% of digital subscribers[10]
Economic
and Regulatory Issues
Although it seems that no one would drive to the store to pick
out a movie when the same product is available at the touch of
a button, it is not easy for VOD to compete with the $12 billion
video-rental market. VOD also has other competitors; here are
some of them:
-
Pay per view.
-
Internet movie services.
-
DVRs.
-
Mail order DVD services.
While fighting the war for costumers VOD has many of its own problems
to solve.
One of the biggest is deriving a profit from the services. With
the maturation of video on demand technology, cable networks want
to see their profits growing instead of just using VOD as a means
to market or brand their networks. For programming investments
in the on-demand space to work, it must be clear “who is
watching what and for how long. That is the only way advertisers
are going to invest ad dollars in the medium.”[11]
There are companies that are already making it possible to identify
and define the VOD audience and provide data on the types of on-demand
content that resonate with particular costumers.
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With
that data, advertisers will have a better understanding of
where to place ads in on-demand programming and will be better
able to discern whether they should develop their own branded
VOD channels. Such channels might include advertorial, behind-the-scenes
or "the making of"-type content. High-definition
content delivered on-demand also has been cited as another
way to monetize VOD.[12] |
Programmers
will start promoting VOD much more once a financial model emerges
and VOD usage becomes rated and measured effectively enough to
begin selling advertisements.
Another problem that delays VOD’s ubiquitousness is the
home video release window. None of the film studios, theaters
or video rentals wants to give up their rights to exclusive materials.
The average home video release window is 51 days hence people
watch movies in theaters or on DVDs before they make it toVOD
services. The situation in Europe is even worse than in the States.
Studios in Europe release content to VOD companies only after
6 months of the video release.
Most members of this business are furious about it. “We
see no reason why VOD should be offered at a later window than
DVD,” says Ted Fisher, Sales Vice President of content and
business affairs at LuxSAT International, a Luxembourg-based company
that delivers DVD-like rental service over cable.[13]
The third concern is copyright issues. In the new FCC-issued digital
television plug-and-play rules, subscription video on demand (SVOD)
is classified as an “undefined business model.” The
Motion Picture Association of America intends not to give to VODs
copyrights and classify them as “copy never” which,
according to the SVOD member Starz Encore Group, would “dampen
consumer interest in SVOD and perhaps doom the service as a business
model.”[14]
Finally, the cost of VOD service is still not affordable to most
households.
Eventhough content providers do offer a broad range of VOD services,
analysts predict that profit will come mainly from adult programming.
It is the main money generator for pay-per-view and it might attract
huge audiences to subscribe to VOD services. A senior analyst
with Paul Kagan Associates says:
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about
20 to 25 percent of VOD revenues will be adult… People
can pay on a pay-per-view basis to watch a Playmate take a
bubble bath, or they can watch adult movies for the same money.[15] |
The
businessmen agree that VOD now is less of a technological issue
than a question of demand. The market is somewhat limited to a
tech savvy crowd because all new technologies first are confusing
and some of the content that is online is still cumbersome to
control. According to Jim Ramo, CEO of one of the biggest broadband
carriers Movielink, only about 15% of customers transfer the content
from their PC to the TV.[16]
Applications
of the Technology
The name of the technology “Video on demand” explains
its use. It is designed to enable television viewers to watch
whatever they want whenever they want. VOD makes television a
personalized medium given that a person does not depend on the
broadcasters’ schedules anymore. For its customers VOD offers
a chance for viewers to set a personal schedule and not depend
on the network and cable television program lineup. The digitalized
content of a TV channel with some extras that are not accessible
for analog TV viewers should be available for the costumers of
VOD anytime, anyplace with the function of VCR and DVD playback.
It’s impressive how fast the use of VOD is growing but the
truth is only a fraction of the households that have access to
the service. There were 6.5 million VOD households in the US at
the end of 2002, according to the FCC’s 10th Annual
Assessment of the Status of Competition in the Market for Delivery
of Video Programming reported.[17] In 2003 the number
rose to 12 million and, according to research from Leichtman Research
Group, there should have been 18 million houses with VOD by the
end of 2004.[18]
At
one end, there is a video server, which acts as repository of
digitally stored information. At the other end, there is the set-top
unit, which may reside inside a personal computer (PC) workstation
or act as a stand-alone unit next to a television set in someone's
home. The set-top unit typically incorporates a digital decompression
engine or decoder. Users can access and interact with video material
residing on a video server through a keyboard or mouse on a PC,
or a remote control device which relays the appropriate control
signals from the set-top unit to the video server.
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In the RHK (a research
and advisory services company assisting the world’s
leading telecommunication companies) Startrax 2004 conference
in San Francisco last spring it was announced that video
on demand is growing 140% annually “and is quickly
becoming the must-have product for carriers.”[19]
According to their research, broadband users are more and
more attracted to the on-line entertainment. Although VOD
takes the smallest part in this business it has the biggest
compound growth rate out of five main entertainment segments.[20]
In
the RHK (a research and advisory services company assisting
the world’s leading telecommunication companies) Startrax
2004 conference in San Francisco last spring it was announced
that video on demand is growing 140% annually “and
is quickly becoming the must-have product for carriers.”
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Figure
2 The Growth of VoD |
According
to their research, broadband users are more and more attracted
to the on-line entertainment. Although VOD takes the smallest
part in this business it has the biggest compound growth rate
out of five main entertainment segments.
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FIG.
3. Compound Annual Growth Rates (2002-2007) |
In
the first quarter of 2004, 70% of digital cable customers had
accessed on-demand programming. The pay cable channel HBO was
the leader of the VOD industry. Its on-demand service accounts
for almost a half of all VOD usage. In addition, after HBO started
offering VOD service in 2003, overall VOD use doubled.[21]
The
first among broadcast networks to offer on-demand services should
be NBC Universal:
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Since
then the newly merged content company has been doing an inventory
of the content it now has and the licensing rights for video-on-demand
use across its stable of networks. (The company's networks
now include USA, Sci Fi, Bravo, Trio, Bravo HD+, NBC, CNBC
and MSNBC.) NBC Universal also has been doing an inventory
of Olympics content and material from the movie and TV libraries
of the newly combined companies. The VOD offering would include
some NBC prime-time content but initially not the franchise
shows such as "Law & Order" or "The West
Wing." Any prime-time network content would be a victory
for the on-demand category.[22] |
Conclusion
Advances in broadband and multimedia technologies have made it
possible for television to become an interactive medium and offer
access to video on demand service through high-speed communication
networks. VOD allows customers to connect to an on-line video
server and access the content anytime they want.
In order for the VOD service to be available, the client must
upgrade to digital cable services. Just as importantly is the
technology’s ease of use with the content programmable with
a television remote control, even allowing the viewer to pause,
stop, forward or rewind the content.
At the beginning of the 1990s, “Video on demand” became
a phrase that drew huge attention from the media and scientific
community but the application of it was complicated. After multiple
tries to put VOD in the market, only now has it started to catch
on in people’s homes.
So far, VOD has not been extremely successful commercially. VOD
encounters major competition from other services like digital
video recorders, home videos and the internet. VOD has its own
problems to solve as well.
Firstly, providers need to build a system for analyzing the audiences
of the product so they can make profit. Secondly, the home video
release window should be smaller: many viewers have seen new movies
long before they are available on VOD. Finally, VOD still has
to solve the copyright security problem with the FCC and the Motion
Picture Association of America.
Nevertheless, VOD is the fastest growing segment of digital entertainment
and is becoming a must-have product for digital television carriers.
Endnotes
[1]Mustillo, Pardo, Belanger, Pierre, “A User Interface
Design for a Video-on-Demand Service Trial in an Educational Setting”,
European Journal of Engineering Education, June 1997, p. 135.
[2]
From Mustillo, Pardo, Belanger, Pierre, “A User Interface
Design for a Video-on-Demand Service Trial in an Educational Setting”,
European Journal of Engineering Education, June 1997, p. 136.
[3]
Whitney, Daisy, “Cablers Seeking Model for VOD”, Television
Week, May 24, 2004, p.24.
[4]
Wikipedia, the Free Encyclopedia, retrieved September 25, 2004
from http://en.wikipedia.org/wiki/Video_on_demand.
[5]
Jeffrey, Don, “Vid-in-Demand Test by TCI Shows Rentals Stopped”,
Billboard, April 22, 1995, p.77.
[6]
Cook, William J., Grant, Linda, “An Ace in the Hole”,
U.S. News & World Report, October 11, 1993, p.68.
[7]
Meadows, Jennifer, H., “Pay Television Services”,
ed. Grant, August E., Meadows, Jennifer H., “Communication
Technology Update”, 9th edition, 2004, p. 88.
[9]
Goldstein, Seth, “Home Vid Still Dominant, Studies Say”,
Billboard, October 8, 1994, p.81.
[10]
Whelan, Carolyn, “Enter Video-on-Demand”, Electronic
News (North America), August 31, 1998, p.1.
[11]
Flournoy, Don, “The Broadband Millennium: Communication
Technologies and Markets”, 2004, p. 145
[12]
Meadows, Jennifer, H., “Pay Television Services”,
ed. Grant, August E., Meadows, Jennifer H., “Communication
Technology Update”, 9th edition, 2004, p. 91
[13]
Whitney, Daisy, “Cashing in on Content”, Television
Week, August 9, 2004, p.9.
[14]
Whitney, Daisy, “Cashing in on Content”, Television
Week, August 9, 2004, p.10.
[15]
Salz, Peggy Anne, “EU Probe Focuses on Content and Competition”,
EContent, September, 2004, p. 9.
[16]
Meadows, Jennifer, H., “Pay Television Services”,
ed. Grant, August E., Meadows, Jennifer H., “Communication
Technology Update”, 9th edition, 2004, p. 90.
[17]
Hall, Lee, “Show me the Bunny: Playboy and VOD”, Electronic
Media, July 19, 1999, p. 19.
[18]
Vittore, Vince, “Carriers call entertainment top priority
for broadband”, Telephony, April 19, 2004, p.14.
[19]
Meadows, Jennifer, H., “Pay Television Services”,
ed. Grant, August E., Meadows, Jennifer H., “Communication
Technology Update”, 9th edition, 2004, p. 91.
[20]
Whitney, Daisy, “Cashing in on Content”, Television
Week, August 9, 2004, p.9.
[21]
Vittore, Vince, “Carriers call entertainment top priority
for broadband”, Telephony, April 19, 2004, p.14.
[22]
Teral, Stephane, “Broadband will drive online entertainment,
February 2004. Retrieved September 25 from http://pulse.tiaonline.org/article.cfm?id=1931.
[23]
From Vittore, Vince, “Carriers call entertainment top priority
for broadband”, Telephony, April 19, 2004, p. 14.
[24]
Whitney, Daisy, “Cashing in on Content”, Television
Week, August 9, 2004, p.10.
[25]
Whitney, Daisy, “NBCU Readies for On-Demand Rollout”,
Television Week, August 9, 2004, p.5.
References:
Cook,
William J., Grant, Linda, “An Ace in the Hole”, U.S.
News & World Report, October 11, 1993.
Flournoy,
Don, “The Broadband Millennium: Communication Technologies
and Markets”, 2004.
Grant,
August E., Meadows, Jennifer H., “Communication Technology
Update”, 9th edition, 2004.
Goldstein,
Seth, “Home Vid Still Dominant, Studies Say”, Billboard,
October 8, 1994.
Hall,
Lee, “Show me the Bunny: Playboy and VOD”, Electronic
Media, July 1 9, 1999.
Jeffrey,
Don, “Vid-in-Demand Test by TCI Shows Rentals Stopped”,
Billboard, April 22, 1995.
Meadows,
Jennifer, H., “Pay Television Services”, ed. Grant,
August E., Meadows, Jennifer H., “Communication Technology
Update”, 9th edition, 2004.
Mustillo,
Pardo, Belanger, Pierre, “A User Interface Design for a
Video-on-Demand Service Trial in an Educational Setting”,
European Journal of Engineering Education, June 1997.
Salz,
Peggy Anne, “EU Probe Focuses on Content and Competition”,
EContent, September, 2004.
Teral,
Stephane, “Broadband will drive online entertainment, February
2004. Retrieved September 25 from http://pulse.tiaonline.org/article.cfm?id=1931
Vittore, Vince, “Carriers call entertainment top priority
for broadband”, Telephony, April 19, 2004.
Whelan,
Carolyn, “Enter Video-on-Demand”, Electronic News
(North America), August 31, 1998.
Whitney,
Daisy, “Cablers Seeking Model for VOD”, Television
Week, May 24, 2004.
Whitney,
Daisy, “Cashing in on Content”, Television Week, August
9, 2004.
Whitney, Daisy, “NBCU Readies for On-Demand Rollout”,
Television Week, August 9, 2004.
Wikipedia,
the Free Encyclopedia, retrieved September 25, 2004 from http://en.wikipedia.org/wiki/Video_on_demand.
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