Cable Channels Slowly Utilizing Broadband for Complementary Delivery

The low cost of producing and distributing broadband- optimized video is giving cable networks vastly more control over their relationships with customers, getting around the traditional bottlenecks of cable MSOs, satellite and broadcast operators, Richmond said. With 35 million broadband households in the U.S. and the online organizing principle of “search, find and obtain,” networks need to account for “potential disruptions against the video value chain” and develop new ad formats to replace the 30-sec. video ad, which is “less and less tenable.”

Broadband Direction’s survey found 91% of the 75 channels offered Web video, and all the top 40. Most offering online video do so mainly to promote TV programs (53%), while the rest use it to generate additional revenue. The vast majority of promotional video (89%) isn’t tied to episodes scheduled to air, but rather “ancillary” content like bloopers and cast interviews. Eight in 10 (81%) using video for revenue generation rely on ads, such as 15-30 sec. preroll clips, with the rest split between subscriptions (13%) and e-commerce (6%). Most promotional or ad-supported video (55%) uses a pop-up browser window to play content, and the rest use a media player embedded in the page. The largest set of video content plays at 300-400 kbps, with the rest scattered at speeds up to 900 kbps.

Notably, only one in 11 (9%) cable channels use RSS feeds to deliver video content, although 2 in 3 have e- mail newsletters, Richmond said. People opting in to newsletters or RSS feeds are “clearly the most valuable customers that a company will have,” and they should be cultivated: “Most customers are very information- resistant.” Overzealous spam filters balance out the low cost of e-mail newsletters, but a larger untapped opportunity for cable channels looms: Using fast Internet connections to deliver high bit-rate content on a downloadable, not streaming, basis, Richmond said. Channels currently offer video on a “least common denominator basis,” sending the same content in the same package to users regardless whether they have a 14.4 kbps or 100 Mbps connection. A next-generation form of opt-in would utilize a download manager or other application specifically designed to receive large video feeds, creating a “broadband inbox.” It would also be cheaper than streaming, which takes up loads of bandwidth, Richmond said: The broadband inbox is “a very logical pathway to premium services.”

Cable channels have competitive advantages over online firms seen as dipping a toe in online video, Richmond said. With strong brands, large audiences, deep subject matter expertise, wide promotional opportunities and existing advertising relationships, cable channels can get ahead of even media-savvy online firms like AOL and Yahoo, he said. “The key here is that incumbents cannot be passive,” noting that the dominance of Sports Illustrated 30 years ago gave way to a highly fragmented but lucrative sports market that ESPN captured through dozens of online and offline subsidiaries. Asked if Google was seen as a competitor for broadband video, Richmond said the firm’s heavy search focus will lead it “assert themselves as kind of a front door,” not distributor, of video.

MSOs will start to see broadband video as a revenue generator as they test different online delivery formats, such as offering highlight reels, programming archives, exclusive pay-per-view and user-assembled programming choices, Richmond said in response to a question. So far, the broadband emphasis for MSOs has been on access: “Legitimately there are some competitive concerns” involving MSOs’ use of video-on-demand to the set-top box, and they don’t want to confuse customers by offering dueling delivery choices for computer and TV, he said. But “there’s no question that cable MSOs are going to embrace revenue generation from content” out of economic necessity.