General

A Sea Change in IPTV?

Video on demand: it's just an add-on to linear TV—right? A nice extra, but not absolutely essential to your IPTV strategy.

by Gerry Blackwell [December 31, 2008]

Think again. The world is changing. Video on demand (VOD) may be the key to a successful television strategy in the future. And inline VOD advertising, a relatively recent phenomenon, opens up a whole new revenue opportunity.

Or so says SeaChange International, supplier of VOD systems to some of the largest cable companies in the world—including Comcast, Cox Communications, Canada's Rogers Communications, and Britain's Virgin Media, which is currently involved in a crucial trial of SeaChange's dynamic inline advertising solution.

SeaChange also supplies some of the smallest operators, including ISP and telco TV providers such as Rainier Connect in Tacoma, Washington and Sunflower Broadband in Lawrence, Kansas.

"We're working pretty aggressively to get into that market," SeaChange vice president of product marketing Alan Hoff says of the emerging ISP and telco segment.

Earlier this year, the company introduced a scaled-down, economical version of its flagship VOD product, Axiom On Demand, and a similarly scaled-down version of its new AdPulse On Demand Advertising solution.

Launched in June, the VOD Now and Spot Now solutions are designed for operators with less than 20,000 subscribers and start-up advertising operations. (SeaChange has a complete IPTV client platform, but VOD remains its core business.)

The company is also working to integrate its software with popular set-top boxes used by IPTV providers, including those from Amino Technologies plc. SeaChange will go to "almost any length" to deliver integration for new customers, Hoff says, as long as there is a large enough base of customers using the box.

"We see this [ISP and telco IPTV operators] as a next level of opportunity for us," Hoff says. "Because for those folks to stay competitive, it's not enough anymore that they just offer internet service. They need the video element, and an important part of that is VOD."

Benefits of VOD
Key benefits of VOD for IPTV providers? It attracts new subscribers, reduces churn and generates new revenue streams—including from inline advertising.

But don't take SeaChange's word for the growing importance and value of VOD.

Neil Berkett, CEO of Virgin Media, told an industry forum earlier this year, "We are at the start of a fundamental shift in the way people consume TV." He was talking about VOD.

According to Berkett, his customers now use the company's on-demand service on average 22 times a month, and usage continues to grow. Berkett told shareholders earlier this year that VOD views had doubled in one year to 45 million per month by November 2008.

"We believe this is already playing an important role in both consumer retention and acquisition," Berkett said.

Comcast meanwhile reported a 50 percent year-over-year increase in the number of VOD views from 2007 to 2008, from 6 billion as of November 2007 to 9 billion at November 2008—with a running total of 147 million hours of VOD viewing per month.

And Steve Necessary, vice president of video product development/support at Cox, is on record as attributing a 12 percent to 15 percent reduction in churn to the company's late entry into the VOD arena.

Why are all these industry leaders using SeaChange rather than competitors offering similar products? Part of it is market momentum.

"We have a lot of customers and we've been doing this over a good long period of time," Hoff points out. "By dint of our real-world experience and expertise with deployments in all sorts of places, we're able to offer greater reliability, greater scalability—and we're battle tested, we're proven."

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