DVR vs VOD From Riot to Reckoning
From Riot to Reckoning
A recent major study by The Carmel Group, commissioned by a large premium content provider, indicated some unique strengths and weaknesses for the varied multichannel technologies known as Digital Video Recorders (DVRs) and Video On Demand (VOD). Further, it indicated how ultimately the two technologies cease competing. Rather, they are so very similar and are morphing toward one, i.e., to give viewers much, much more in terms of viewing choice and control, ultimately leading to more viewing pleasure (and, presumably, more subscribers and revenues). Additionally, the study pointed to the inevitable success of both DVR and VOD as future forms of advanced services in the multichannel environment (because consumers so like what they both do to mere TV viewing). The results of this study are impressive for both satellite and cable operators, as well as to future multichannel telco operators, and many other content providers.
For years, those in the satellite industry have felt generally that the DVR is a basic friend, and VOD a basic foe. That overly simplistic reasoning was grounded in the fact that technologically the Direct-To-Home (DTH) industry was only really capable of developing a robust DVR solution, because the satellite infrastructure does not support a viable two-way delivery system that is needed for a truly viable VOD service. The closest DirecTV and EchoStar could come to VOD was the Starz Encore Subscription VOD (SVOD) service offered exclusively on DirecTV. With Starz’ SVOD, for a small monthly sum, DirecTV automatically downloads a given number of movies to the set-top box’s hard drive, regularly throughout the month, thus constantly refreshing the available movies, available for consumers in an almost VOD-like fashion. Further, most in the satellite industry saw the cable industry pushing its inherent advantage in VOD, and reacted by selling the superiority of DVRs over VOD.
Over on the cable side, early views were to do just that: Focus on VOD as something satellite cannot do, and make that the main – and often only – business plan. Yet a few executives, such as Charter’s CEO Carl Vogel and Comcast’s CEO Brian Roberts, realized the truer value of DVRs in combination with VOD, and started versions of that DVR-VOD duo across their higher-end systems nationwide.
Going forward, however, there still will be many cable systems nationwide that will only be delivering VOD, if that, and satellite is a long, long way from ever being able to compete head-to-head with its own version of a robust VOD platform. Put another way, for those seeking a pure VOD activity, they will only get that from a cable subscription. Further, the satellite players are gambling that their continuing offer of a robust, nationwide DVR platform is enough to keep subscribers coming to satellite over cable.
Thus, presently, in most parts of the country, there still is a clear difference between what DVR offers (via satellite) and what VOD offers (via cable).
Beginning with DVRs, key attributes today include 1) intense consumer loyalty and attraction, 2) clear consumer choice, control and customization, 3) the ability to pause, record and rewind live (and future) TV (including multipart series), and 4) the availability of lifetime subscriptions.
Conversely, the key failings of DVRs are 1) consumers must be more proactive, 2) a monthly fee is typically involved, 3) there is limited recording space, 4) hardware upgrades require a new set-top box, 5) standalone set-tops usually require technician set-up, and 6) there’s a lack of consumer education as to what a DVR is (and does).
Turning to VOD, its strengths are 1) consumers are provided choice and control (but limited customization), 2) it requires no additional hardware, 3) it is relatively inexpensive to roll-out and very scaleable for cable operators, 4) it involves a fairly strong “Digital Rights Management” solution, and 5) it is acquiring strong support from adult programmers.
The problem areas for VODs are 1) many subscribers don’t know they have VOD and/or think it costs additional sums to activate, 2) most cable interfaces make the VOD menu hard to find, 3) VOD is not perceived as “live TV” by some consumers, 4) many content providers do not have reasons to repurpose their valuable content, preferring instead to preserve their linear content to protect ad revenues, and 5) operators fear offering a High Definition VOD product, because they believe it will use up too much server space and bandwidth.
In the end, although VOD and DVRs have different technical approaches, they do share the same overall benefit for consumers, which is superior convenience and control. It is also important to note that there is a significant amount of consumer confusion about both DVRs and VOD. In order to bring both – either separately or together, into each system—and into the heart of multichannel TV, much in the way of consumer marketing and education is necessary. The responsibility for most of this education falls on the shoulders of the true VOD and DVR stakeholders, i.e., both the hardware and the software providers who stand to reap huge revenues once VOD and DVRs reach America’s multichannel mainstream. Ladies and Gentlemen (of the telco, cable and satellite ilk): Begin marketing the masses; because if you build it, they will surely come!
Moreover, a handful of projections based upon this extensive research indicate that by year-end 2008, DVRs will have penetrated almost 33 mil. (or about one in three) households. As of year-end 2004, 8% of TV households will include DVRs. Some three million of these were offered in cable households, lead by the Number One and Number Two cable operators, i.e., Comcast and Time Warner Cable. Further, comes 2007, the cable industry will surpass the DBS industry in the number of DVR deployments nationwide. By 2008, between 35 million and 40 million digital VOD households are projected, amounting to a $3+ billion revenue stream. The Carmel Group also estimates annual digital subscriber churn with VOD will be at least 6% less.