Video on Demand Update: 2007 State of the Industry

Back when I was just a young thing, an (old) man said to me, “Girl, you got a lot to learn about video on demand.” Or maybe not so much. He, with all seriousness, promised me one thing — there would be no VoD. Ever. He’d been in the industry for well over twenty years and on demand programming was always the golden ring. The rainbow. The dream.

Funny thing is, he’s still right. We don’t have true video on demand. We have a lot of video and a lot of demand, but actual, true video on demand remains elusive. There are several reasons, one of which being the root cause of the current writers strike: money. I will be focusing on the motion picture industry here, because the ownership rules are different in the movie biz.

Despite ample evidence that people — customers — are willing and eager to pay for content, the producers of said content refuse to believe. Think about it: since the rise of the DVD, consumers have been snapping up box sets of old and new TV series. While there is a thriving secondary market for these products, it is achingly obvious that people are willing to spend money to own programming.

Likewise, the fact that Netflix users have waiting lists should be proof that a robust rental market remains.

Look, too, to the success of iTunes. Talk about a gazillion or so legal downloads!

The major producers have all invested billions in digitizing content. Tape, even well-stored tape, is a fragile medium. Digital video is a much safer (and space effective) option. Porting digital content to various other media seems to be relatively inexpensive, though my experience shows that the studios will manage to make it less so.

So what is the real barrier to video on demand? I think it’s greed. Once producers translated the value of their content to the online world, they had another realization: cutting out the middleman would be even more lucrative. In this case, the middleman is the means of distribution. If the content producers could own the means of providing content, more money. Win-win.

The problem is that producers are not necessarily the best entities to provide content. They are too far removed from the customer. In some ways, the producers are like Congress: the people in charge of making decisions about the technology don’t actually use the technology. Surely that explains the over-emphasis on mobile phones over computer-based delivery.

I still believe that the key to effective online video distribution is diversity. Rather than trying to keep all the activity in-house, the producers need to let their babies fly! Stop trying to herd customers into a single holding pen; if we want to buy at iTunes, let us. If we want to go through Hulu, great. If we want this service or that service, make the content available.

Today’s consumers value (in no particular order) price and ease of use. If you want the download or streaming markets to work, don’t require special software, don’t require digital rights management barriers that fail, and don’t penalize your customer when you change technologies (talking to you, Major League Baseball!).

Today’s customers also have a different sense of value when it comes to digital entertainment. They know the cost of a blank, high quality DVD — and they know what they’re paying for packaged DVD products is high. They get who’s paying for content downloads and streaming — and they don’t like the idea that they’re paying for a piece of the distribution yet being charged as if the burden rests wholly on the content provider.

Producers like to think they have control of pricing, but when the price — and I’m including ease of use in the price — is too high, then the consumer will seek alternatives. Possibly the biggest barrier to true VOD is the ostrich syndrome: consumers are in charge yet media executives refuse to see the shift.

In the world of cable and satellite, the real barrier seems to be storage and discovery. Storage, of course, being the smaller problem. Oh, that and scheduling. What else? Right, accounting stuff. The mere act of licensing programming to traditional VOD providers is a lot of work, and I doubt that anyone believes the traditional remote control is an effective search tool. Can you imagine how responsive television-based VOD would be if finding programming was easy?

It is fascinating to me, especially as new television programming is slowing to a trickle, how hard the big media companies are working to keep customers from enjoying their products. The golden moment came when NBC/Universal took all their toys away from iTunes and went home. Yeah, you’re bleeding advertisers and you think it’s a grand idea to sever a solid revenue stream? That’s the ticket.

Luckily, BBC America has been running Torchwood and Dr. Who marathons. They get it. On so many levels.