DIRECTV DEAL SEEN LIKELY TO JUMP-START VIDEO-ON-DEMAND
News Corp.’s potential acquisition of Hughes Electronics’ DirecTV could provide catalyst to jump-start moribund video-on- demand (VoD) business that’s slowly gaining interest of satellite and cable industries, officials said at conferences in N.Y.C. last week. “The thing that forces the cable industry’s hand [toward VoD] is if General Motors and News Corp. get together,” an analyst said. “If Rupert gets a hold of DirecTV, his mode will be to increase market share very rapidly and he will be very competitive and for the cable industry to move faster” toward implementing advanced services such as VoD.
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Indeed, while the satellite industry appears poised to announce VoD agreements -- Blockbuster, DirecTV and TiVo have been in discussions for months -- cable industry slowly is joining fray. Pockets of VoD have emerged largely over broadband fiber networks and manufacturers are preparing to add personal video recorder (PVR) functions to set-top boxes (STBs).
Scientific-Atlanta is expected to have STB by midyear with Western Digital subsidiary Keen Personal Media PVR software, while Pace Micro Technology is building hard drive-based STB for Comcast that’ due in 3rd quarter. Comcast last week completed acquisition of 2.5% stake ($10 million) in VoD equipment supplier SeaChange International. It also placed order for VoD gear and received warrant to buy additional 100,000 shares of SeaChange common at $13.25. Motorola and Charter Communications also are developing STB PVR reference design that would allow MSO to choose technology it wishes to deploy and implement it via software.
“Last year, we were chasing about 20 deals worldwide that involved the integration of PVR hard drives, and this year there are more than 80 opportunities,” Seagate Technology Vp Michael Skalar said at Kagan VoD Summit in N.Y.C. “Not only are major CE companies and cable companies interested, but also smaller, nichier firms that are coming up with gaming, audio and set-top box applications.”
Major struggle for VoD, however, has been to get major film studios, which are concerned about copyright protection, to release content. Blockbuster (BB) VoD test with Enron in 4 markets -- American Fork, Utah, N.Y.C., Portland, Ore. and Seattle -- has delivered only one MGM movie in pay-per-view (PPV) window to its customers. It signed on Vivendi Universal’s Universal Pictures last week, agreement that’s likely to increase VoD service’s current offering of 200 titles. Universal VoD deal was negotiated as part of renewal of broader revenue-sharing agreement, but won’t serve as blueprint for discussions with other film studios, BB CEO John Antioco said.
“There’s no sense in expanding the service based on the kinds of offerings we have right now, so you look at this as a technical trial that we're learning from every day,” Antioco said. “But do I envision VoD happening without all the appropriate content? I think that it’s going to be slow. If the content is made available, we'll expand. If not, we'll stay where we are.”
In addition to DSL test, Blockbuster/Enron is studying linking service to DBS, Brooks said. DirecTV and TiVo are expected to introduce service later this year, starting with niche programming, but later added premium services such as HBO, Showtime or Starz Encore. Starz made strong pitch at conference for its Starz On Demand subscription VoD service, hanging banner at conference and distributing literature outlining service despite fact that it hasn’t yet secured cable or DBS agreements. Starz on Demand service listed DirecTV and EchoStar as partners, although spokesman conceded agreements hadn’t been finalized and field trials hadn’t been scheduled.
“We could do it [VoD] immediately and it will likely include one of our current programming partners,” TiVo Vp Stacy Jolna said. “They [Starz Encore] want to move forward on this, as do Showtime and HBO, so you have to present a level playing field for all of these companies. I do believe that niche programming will be the hallmark of any premium service we develop with DirecTV.” Current DirecTV/TiVo STB is capable of adding VoD service, having 40 GB hard drive and 2 tuners, 2nd of which is expected to lit up by 4th quarter, Jolna said.