VIDEO ON DEMAND

TERESA GODDARD

INTRODUCTION

In today’s fast paced, no time, got to have it now environment, video on demand (VOD) is an emerging technology that can benefit consumers.The benefits of VOD technology include the following:

VOD is a concept that has been around for several years.Only recently has the technology become available to push it out to consumers.There are more broadband and cable subscribers now than ever before.This statistic along with advances in technology have made VOD a more attractive technology for consumers.The question, however, is whether companies can provide the technology in such a way that consumers will want it in its current form.

So, what exactly is VOD?Video on demand, or VOD, is a medium by which a user can download many different types of video, from news and educational offerings to a wide variety of entertainment features to be viewed on a personal computer or via television.The biggest of these is entertainment.Our society is one that wants to be entertained.The film industry realizes this and has the vision to create a way for users to watch full-length feature films in the convenience of their own home at any time.No more waiting on a pay-per-view schedule to coincide with a family schedule or running the risk of your favorite movie not being available when you go to your local video rental store.

In its simplest form, VOD already exists in our homes.If someone wants to watch a particular movie, they can get the tape off the shelf, pop it into the VCR, and watch it.VOD offers these same conveniences.Video can be viewed at the users convenience with VCR-like controls such as stop, rewind and pause.

As technology becomes easier to use and more affordable, more and more users see the need for technologies such as VOD.In order for companies to realize the potential of this newly emerging market, many factors must be considered.

EXPLANATION

The purpose of this paper is to present the facts on what is happening with VOD technology right now.Also, by presenting what companies are doing and plan to do, a better understanding can be gained about VOD and appropriate conclusions can be drawn as to the applicability, affordability and usefulness of this technology.

There are many companies on the cutting edge of providing VOD technology to the end user.In order for it to be successful, all facets of accessibility, content and user interfacing need to be considered.Consumers can be very fickle.If they try a new technology that should be very interactive and useful and encounter problems, they will toss it to the side in favor of the next new and cool thing that comes down the road.

CURRENT TECHNOLOGIES

The most utilized format for piping video into homes and offices at the present time is DSL.According to RHK Inc. industry researchers, piping of video is expected to double every year for the next five years.With this statistic in mind, many DSL providers and telephone companies are currently implementing services to take advantage of this expanding market.

Set top boxes are also used with DSL.Analysts foresee this industry being worth more than $4 billion by 2004.The DSL market has declined 44% in the first half of 2001, and many observers feel that the overall success of VOD is tied to the penetration rate of DSL and the efforts of telephone companies to offer a broader range of services.A cost benefit to using DSL to deliver VOD is that the components already exist; copper phone lines, computers and televisions.

In October of this year, GlobeSpan, Inc. acquired Virata Corp.Armando Geday, the company’s chief executive, stated that they have had VOD by DSL for a few y ears.If it is to go global, he states, it will be with DSL because cable does not go everywhere and personal computer penetration will not be at a high enough rate.Geday also believes that consumers will also be more likely to use the television rather than a personal computer because they won’t have to learn how to use that television like they would a computer.

One of the disadvantages of delivering movies over DSL is the issue of royalties for the Hollywood production companies.This is the biggest hurdle telephone companies face today and the main reason why Bell Labs postponed the roll out of delivering video over DSL.

Another way to deliver VOD is via broadband Internet connections.However, many in the industry feel that more development needs to be done in the area of download time.Currently, download times can be up to one hour or more for a feature-length film.This does not bode well for companies that have invested their efforts in rolling out VOD via broadband.Also, the penetration rate of broadband Internet access into homes is not at a high enough rate, but the industry is expected to increase dramatically in the next five to ten years.

In August, 2001, Sony pictures, along with four other movie studios including Paramount Pictures, MGM Studios, Universal and Warner Bros. announced a joint venture to create a VOD service to deliver their movies to personal computers.This VOD service will be called Moviefly.What is not clear, though, is what content distribution structure will be used.Guesses can be made as to whether they will use a caching system.This bodes well for companies like Akamai and Inktomi.Logically, the studios could use satellite distribution to those caching points.Security then becomes an issue.According to Chris Baugh, principal analyst for Northern Sky Research, fiber can be used to distribute the content.

The announcement of this anticipated service also has DSL and broadband implications.Telephone companies are looking at equipment that will better enable them to deliver VOD.

LITERARY REVIEW

In the following section, information is presented as to what is happening in the development and deployment of VOD offerings.Company strategies and alliances are being formed even as we speak to be the first to market with the broadest range of titles for the least amount of cost to the largest audience possible.

COMPANY STRATEGIES

There are companies on both sides of the VOD equation.Movie companies such as Sony and MGM have the content that they want to distribute to consumers.What they don’t have is the software or means to distribute the films.That is where companies like Microsoft, nCube, and N2 come in.

The largest single location video server in the U.S. will be built by nCUBEfor use by Time Warner’s Los Angeles market.They provide scalable streaming media solutions to all broadband networks.

Another company is N2, a start-up company that has only been in existence since late this summer.Its main product is software that delivers digitized films to cable companies.It wasn’t long before N2 received a call from AOL Time Warner Inc.They were looking for help in developing a standard for creating interactive television services.Together they have created technical specifications that have helped N2 gain credibility in the cable industry.

As mentioned before, Sony pictures has teamed up with four other big name movie companies to start a VOD service.This service, Moviefly, is scheduled to be available early in 2002.What is not certain is how the films will be distributed and what the charges will be to consumers.These decisions are expected to be finalized in the coming months as Moviefly is implemented in several markets nationwide.

Not to be left behind, Disney announced in September of this year that it will team up with News Corp. to launch Movies.com.This service is also scheduled to debut in 2002.The difference between this service and the one announced by Sony is that Movies.com will have movies available before they have gone to the pay-per-view window.Movies.com will be available to consumers via digital set-top cable boxes and all forms of broadband Internet access.Disney also plans to offer other services via Movies.com, such as purchasing movie tickets and merchandise.Michael Eisner, Disney’s chairman, sees Movies.com as a service that takes advantage of technological advances enabling consumers to enjoy their favorite films and other forms of entertainment on demand in their homes.

Another partnership is between Copper Mountain Networks and InfoValue Computing.This partnership enables broadband service providers to bring VOD and high-speed DSL services to Multi Tenant Unit buildings.This will allow video servers to be housed within the building.However, if a movie is not stored locally, the network server can pull it from a central repository or a peer network.This allows for a much larger title list.ISPs can leverage the copper wire infrastructure already in place in a hotel, apartment building, or even on a cruise ship.The solution provided by Copper Mountain Networks and InfoValue Computing enables providers to quickly deploy this service and bundle it with high-speed Internet access, which makes it very appealing to consumers.

Microsoft is also right in the middle of the VOD arena.Its product, Windows Media Video 8, which was unveiled in March of this year, is touted as being the first motion-picture-ready video code.With its technology, Microsoft is sure that movies can make it online.With security being an overriding issue for providers, Microsoft has incorporated digital rights management in the new Windows Media for movies.

Microsoft has partnered with Intertainer.com to be the first to offer a variety of movies over the Internet.At present, it is available in 35 markets, and only to subscribers with extremely high bandwidth connections.Intertainer uses Microsoft Windows Media software.Microsoft is also the largest investor in Intertainer.Their main focus is future users, such as college students who already have access to high-speed broadband networks.A test was done at Bucknell with great results.However, it was not mentioned how Intertainer would handle the policies of some institutions to limit the amount of bandwidth that is allowed for entertainment purposes.

There are, however, nay-sayers such as Forrester analyst Eric Scheirer who thinks that users will not be crazy at all about waiting for a feature film to download and he doubts the appeal of big screen pictures on the little screen.He goes on to say that cable and satellite VOD will overcome their sluggish start to transform the home video industry and smother IP-based movie services.This goes back to the fact that movie fans prefer watching films on TVs, not on PCs.

CinemaNow is a Marina Del Ray, California-based company that is the top provider of VOD services.In October of this year it launched the first solution that may be licensed to parties interested in setting up their own VOD offerings.It is called PatchBay and runs with the Microsoft 2000 operating system.In also includes support for Windows media audio, video and digital rights management.

PatchBay is designed to manage the total works of Internet-based VOD distribution.The total works solution of PatchBay includes distribution, syndication, digital and territorial rights protection, user profiling, target advertising, comprehensive pay-per-view and subscription services, e-commerce management and integration of other third-party components.The content of PatchBay is so broad that it can be played on any IP-enabled device, which means laptops, set-top boxes and PDAs are all viable possibilities.CinemaNow’s chief technology officer, Brad Serling, hopes PatchBay will become the “central nervous system” for companies offering VOD.

Many cable companies are now providing their digital cable customers the ability to access films via VOD.Time Warner just recently allowed Cincinnati area subscribers the option of viewing movies and television shows whenever they choose, with the convenient VCR-like options of pausing, rewinding and fast-forwarding.This initial offering is with the HBO Network to offer HBO Video on Demand.The cost to subscribers will be $9.95 per month.Time Warner also plans to offer a service in conjunction with Scripps Networks.Cincinnati will serve as the test market for Home & Garden Television Network, Food Network and Do It Yourself Network.

Comcast is another cable company that is now offering certain markets VOD services.Comcast partnered with SeaChange International, a sophisticated video server system company to bring this service to six cable systems.These areas include Alexandria/Arlington, VA, Monmouth County/Ocean County, NJ, Baltimore County, MD, Howard County/Harford County, MD, Cherry Hill, NJ and Union, NJ.Mark Hess, Vice president of Digital Services for Comcast calls VOD one of the most exciting changes to television since its inception.SeaChange’s ITV System has the patented MediaCluster storage technology, which provides the most economical platform for storing and steaming media.

Comcast is also offering VOD services in partnership with Concurrent Computer Corporation.The areas covered in this new service offering include Albuquerque, NM, Lower Merion and Willow Grove, PA, Mobile, AL and Savannah, GA.Comcast agreed to purchase MediaHawk Broadband VOD Systems from Concurrent.Jack Bryant, President and CEO of Concurrent sees great synergies coming from this alliance to provide VOD offerings to Comcast’s subscribers.

VOD seems to have all but taken off in the cable television market with the above examples.Although many avenues are being pursued to deliver full-length feature films via IP-based telephony, it remains unclear at present how the market will swing.All parties involved are betting their investments on consumers going their way.As in all business ventures, this poses risks that can be both predictable and unpredictable.

OPINIONS AND REVIEWS

There are many proponents of VOD.Test cases and trials have been done to assess the marketability and demand for such a technology.

As mentioned in earlier sections, members of research institutions have made predictions on the permeation of DSL and broadband into homes in the future.The demand for VOD services are dependent on this continued increase.

The Hollywood heavies are counting on the fact that the future of movies will be via the Internet.Jack Valenti, president of the Motion Picture Association of America views the recent court decision against the song-swap service Napster as a victory for all content owners.He believes that the decision will encourage studios to put films online.Also, this is the time to put into place standards and procedures for allowing consumers to access these films, unlike the Napster debacle.

VOD is touted to replace the $1.5 billion pa-per-view cable and satellite business that never quite took off as expected.Many are optimistic that VOD will not encounter the same consumer indifference from poor marketing, slim selections and haphazard start times.The market is just starting to expand.Intertainer, which is currently in Cincinnati working with DSL provider ZoomTown, plans to expand into up to 30 markets by the end of this year.

There is also debate as to whether consumers will want to view VOD offerings with their conventional television or on their computers.Blockbuster’s chief marketing officer, Allen Klose, believes the TV is where the biggest number of people are.Blockbuster has been conducting a trial that will end shortly that offers movies on television via VOD.

On the other hand is Mark Sonnenberg of Intertainer.Although Intertainer offers a PC-to-TV device for die-hard old-fashioned viewers, Sonnenberg believes that people will want to watch videos on the PCs.In the future we might have an entirely new entertainment device that is a combination of a television and a PC.

Another consideration for computer viewing is streaming or download.Sony’s videos have to be downloaded, which may cause frustration with download times.Intertainer, Blockbuster, Road Runner and CinemaNow use video streaming so users can start watching immediately.Sonnenberg also feels strongly on this point.It is true that the image quality is better with a download, but he feels that most people would rather watch it right away than wait a few hours.

In September, a consumer participated in a VOD test case.Peter Lewis, in Austin, Texas, used Time Warner’s iControl to browse for movies, download and view them.He was very critical of the selection of only around 100 movies.The biggest downfall to Peter was waiting for the movie to download.That is, once he found one.He compared this as going to Blockbuster and finding out that the movie he wanted to rent was unavailable.Only, this way, he was disappointed without leaving his chair.He only had eight hours to view the movie.The common features were available such as stop, rewind, and pause.However, if he didn’t view it in its entirety during the eight-hour time frame, he had to pay for it again. His view of this VOD was DOA.Other services normally have a 24-hour clock on viewing.Another downfall Peter saw was the inferiority of viewing a movie on a computer rather than on a conventional television.To him, VOD will have its place in the future, but not yet in its present state.

The iHollywood Forum, a Los Angeles-based networking organization meets monthly to discuss the impact of the Internet, wireless devices and emerging technologies on the entertainment business.When they met in March of this year, the consensus was that VOD using the Internet as a delivery vehicle will be a big business, eventually.They also agreed that digital rights management is the largest hurdle to be overcome.

Julia Fenster is vice president of film, video and broadcasting for Reciprocal, a company that licenses DRM technology for content owners.She feels that the next two years will be a ‘courtship period’ with lots of potential.Content owners should not wait to see what happens, but should begin now to form strategic partnerships.As for security, that might not be solvable.No matter what is put in place, there could always be some teenage kid out there that cracks a code of some kind.

METHODOLOGY

The methodology used in researching the emerging technology of video on demand was one of analysis of facts and the forming of conclusions based on those facts.Although VOD was once explored in the early 1990s, it is now becoming a fast-growing technology that can viably be delivered into the homes of many customers.The advances in technology have made it possible to deliver VOD in a variety of ways.Many companies have developed strategic alliances to package the VOD solution that they feel will be profitable in today’s volatile market.

A combination of search methods were used to gain more information on VOD.After researching many ProQuest and Internet articles on what has been done in the past, a proactive and updated search was done of these same sources to get the most current reviews and company data on the subject of VOD.It became apparent that the market for VOD is ripe and that new successes are being achieved every day.A final method was used to gain consumer opinion for VOD.Family and friends that are very fond of watching the latest movies were asked how they would feel about the new VOD technology and its methods of delivery.

CONCLUSIONS

Based on the research done for the emerging technology of VOD, I feel that it will have its place in our homes in a variety of ways.Depending on the price consumers are willing to pay for the convenience, this market will be an exciting one to watch.We already have various forms of VOD with the new TiVo technology and pay-per-view movies.For it to be true VOD, the capabilities must be in place for a user to watch any video at any given time and be able to stop, rewind and pause the video.VOD will be a viable option for those consumers who are not in an area supported by cable and do not want to buy a satellite dish system, but do have high-speed Internet access.

There are basically two schools of thought on VOD to the home.Consumers will either be tied to their television sets with services offered by dish and cable companies, or high-speed Internet access with set-top boxes.On the other hand, the personal computer will be the way we go.That is what the big name movie companies are betting on.However, as shown in test trials, watching a movie on a computer just might not cut it for viewers who want to be in their Lazy Boy with the remote handy.

As rapidly as technology is evolving every single day, I feel that VOD will be a gigantic industry in five to ten years.At present, there are still too many questions unanswered as to what will be the standard for delivery and how the different catalogs of titles will be licensed.However, this is not the time for companies to sit back on their laurels and wait to see what happens.Strategic alliances are being formed now to insure that the software and hardware are in place to deliver VOD to consumers.

I took an informal survey of family members over Thanksgiving.After explaining the technology and how it could be delivered either via personal computers or television, they kept returning to the question of “Why would you want to watch a movie on the computer?”To them, it seemed silly to want to sit at a computer when the big television was right across the room.

The bottom line is that we do not know what technology will bring us in the future.What we thought was out of reach just a few years ago is now quite commonplace.VOD is a technology that will bring into our homes a variety of video offerings by a variety of means.At present, though, consumers will continue to order pay-per-view movies, go to their local video rental store, and scan the television guide for the best movie from the selection available.

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