VOD Small-Scale Analysis

Operators of small and medium-sized cable systems historically have had trouble creating a viable business model for video on demand (VOD).

Since early 2007, the Comcast Media Center and ARRIS (then C-COR) have offered a product, VOD In a Box, which provides a turnkey VOD solution for cable systems with 25,000 or fewer digital subscribers. (To read about the initial launch, click here.)

The jointly offered service can deliver up to 3,300 hours of centrally managed VOD programming per month, including HD VOD.

According to ARRIS Vice president of On Demand Strategy Basil Badawiyeh, several operators are using the VOD In a Box product, and several more will be deploying it in the near future.

But lingering reticence led the CMC and ARRIS to create a financial modeling tool to help operators quantify the product’s revenue and expenses. (To read the initial announcement, click here.)

In initial trials of the valuation software at participating cable companies, the CMC found that on average, affiliates using VOD In a Box could see a payback within 13-18 months, as compared to the 30 to 40 months for a typical VOD system, according to a CMC statement.

"I like the structured approach," said Alan Tschirner, VP of technology with NCTC. "It takes a lot of the hand-wringing out. You can look at the six months prior to VOD launch and six months after."

The initial analysis found that on average, affiliates using the service increased their pay per view revenues by 17 percent per month for each of the first 12 months, according to the CMC statement.
More VOD analysis That VOD systems can require considerable "care and feeding" is a point that Charter VP Network Operations and Engineering Keith Hayes makes in his current article in CT. But there’s money to be made all the same.

"VOD is a significant revenue generator, whether used transactionally or for subscription," wrote Hayes. (To read the full article, click here.)

Another approach to VOD for smaller systems comes from the example set by Suddenlink, which reduced its upfront VOD infrastructure costs by building regional backbone first.

"Centralizing made it more cost effective," said Suddenlink VP Advanced Technology Greg Gritaitis. "We have one VOD system instead of 23 small ones." (For more, click here.)

Whether VOD is in a kind of mid-life crisis appears to be the theme of a Light Reading Cable Industry Insider report written by contributing analyst Craig Leddy. One disruptive trend is that online video viewing is exploding.

According to a study cited in this recent CT story, online video viewing among cable subscribers already surpasses VOD by a nearly 2:1 ratio.

– Linda Hardesty

Read more news and analysis on Communications Technology‘s Web site at www.cable360.net/ct/news/.