The sixth annual On Demand Summit (held at Convene in New York City on May 22, 2014) featured executives discussing the news and trends of the business of video on demand (VOD). The event is produced by Schramm Marketing Group on behalf of the industry trade publications Broadcasting & Cable and Multichannel News. In terms of watching movies on demand, not surprisingly, viewership continues to grow.
The biggest trend, particularly among younger people, is the willingness to watch movies on platforms other than TV, such as computers, tablets or mobile devices. The main reason is the convenience of watching movies wherever the viewer happens to be. The TV Everywhere concept was mentioned off at the conference. Even with more people watching movies on computers or mobile devices, TV is still the preferred method for most viewers for watching movies on demand.
The State of VOD: An Overview
The event opened with a presentation from Rentrak corporate president Cathy Hetzel and Rentrak vice chairman/CEO Bill Livek.
According to Rentrak (the leading company that tracks consumer viewing and purchases of movies and television show), there are 5 million U.S. households that have VOD access, and the average viewer spends nine hours per month with VOD content. The majority of that content (78 percent) is free on demand (FOD), which is content that is available at no additional cost to the viewer who watches it on cable TV, satellite TV or on the Internet.
Transactional on demand (TOD) viewing — paying an additional cost to see content on demand) — is also on the rise. Rentrak’s Livek also noted that in the past five years, the entertainment VOD viewing has “doubled, not just with transactions … but also with time spent.”
As for how advertising figures into VOD viewing, Livek noted: “It appears more and more that consumers will trade off watching ads where fast-forwarding is disabled on the remote control because it’s convenient.” For the most part, ads are inserted and are more tolerated in VOD watching of TV shows, whereas advertising is a harder sell for movie VOD viewing, since most consumers want to watch movies on demand without the movies being interrupted by ads.
Hetzel added, “The question becomes, and it will be really interesting to watch, ‘We’ve moved people away from [live] TV to video on demand. Did we move them there because of the convenience factor, or did we move them there because there were fewer commercials?’ I think we’ll test the consumers’ tolerance for commercials, and I think the industry will reach a balance over time. We probably won’t have as many commercials as we do on [live] TV.”
Livek countered, “Remember, the consumers will surprise us, time after time, for convenience.”
In a PowerPoint presentation, Rentrak revealed that Top 5 TOD movies of 2013 were “Identity Thief” (No. 1); “Argo” (No. 2); “Flight” (No. 3); “Django Unchained” (No. 4); and “We’re the Millers” (No. 5).
Electronic Sell-Through Trend Examined
VOD doesn’t always mean renting movies or other content. More and more consumers are buying their movies in digital (non-disc) format through electronic sell-through (EST), where consumers pay a one-time fee to download a media file for storage on a hard drive.
Rentrak’s Hetzel commented on EST: “I think it’s an exciting trend. We saw it first with [Verizon] FiOS. They began to offer, a month in advance, a movie title for a higher price, with the opportunity to purchase it and put it in a cloud and have it available to you whenever you wanted to watch it. It’s similar to UltraViolet, which has been around for a bit. But now, it’s just more convenient. You have the opportunity to either buy or rent the movie. Comcast launched that this past year with some great success, with their ability to drive electronic sell-through on behalf of their studio partners.
“When we talked to the studios, they seemed to be very excited about the convenience of EST. Although I think rentals are still higher, the opportunity for making a significant amount of money through EST exists. I think it’s a trend that we’ll see more of our MVP partners roll out.”
Livek added, “I agree, but … we’ve become a renter’s society. Electronic [sell-through] has got a lot of life because there are certain things we need to own … When it comes to titles like ‘Frozen,’ there’s an emotional attachment with your kids. People buy that because it’s emotionally engaged with you. A transient title, maybe not so much. But VOD is the platform to sell through the titles when there’s compelling content.”
Hetzel observed that there is still some fear that people have about storing content in a digital cloud, instead of having the movie to physically touch, as it would be on disc.
Livek agreed: “A lot of people don’t understand the cloud.”
However, that fear will likely decrease over time, just as people adjusted to using email instead of regular mail or making payments online instead of writing checks.
Programming Movies on Demand
In the past few years, companies such as Netflix, Amazon and Hulu have become important players in distributing movies on demand. But cable TV, satellite TV and phone companies still dominate the distribution options for people to watch movies on demand.
Speaking on a programming roundtable, AT&T VP of content for U-Verse TV Richard Wellers said that the company will program more content in high-definition: “We recently ran a film where over 90 percent of the buys were in high-definition. That’s good because embracing the quality; people are not afraid of the price point. We’re going to offer more content in that area.”
He noted that family-oriented movies/children’s programming tends to get “about 50-50” transactions in standard-definition TV versus high-definition TV. “But it’s interesting how [high-definition] is creeping up and, in some cases, overtaking standard-definition. Content-wise, children’s programming outperforms for AT&T. We’ve even gone as far as creating branded folders to make it very easy for them to purchase.” He added that in a lot of cases, children find this content quicker than their parents do.
Marketing and Promoting Movies on Demand
During a roundtable discussion about marketing and promotion, iN DEMAND senior VP of affiliate marketing Lauren LoFrisco commented that the “ability to transition” has been the key to the company’s survival.
“The on-demand experience still varies so widely from each distributor," said LoFrisco. "Each cable company has different offerings, different windows. For us, it’s a huge challenge and focus in licensing the content. It’s really about quality control and taking the time. We really go very deep with the quality-control efforts that we take with our clients to really ensure the best customer experience.”
Comcast Cable senior director of product management Dan Baker said, “We’re constantly experimenting with stunts. We had a Summer of Kids last summer.”
iN DEMAND’s LoFrisco added, “There’s a lot that iN DEMAND does to curate content, similar FanShare. It can be a lead-in to a FOD [free on demand] piece or content element that can be shared by the studios. We also produce custom interviews with directors and actors. And all of that might get sourced into the content folder to get sourced into the content folder to be purchased with the actual movies. That’s continued to be an effective tool with consumers.”
The Digital Entertainment Group (DEG) president Amy Jo Smith noted how the industry has changed according to technology and formats for watching movies in places other movie theaters. The era of Beta and VHS tapes led to the era of DVDs to Blu-rays which has led to the era of digital streaming and downloads.
Smith commented, “At the moment, the industry is at a crossroads, a very interesting crossroads, in that we really have a buffet. We’re working on branding of digital, which we’re calling digital HD. We’re going to get viewers to understand that if they’re going to get a digital version of a movie, there will be digital HD branding, and it will be found as part of the combo pack of a physical Blu-ray disc.”
Comcast’s Baker talked about Comcast introduction of EST to its customers: “It’s still early days, but we’ve seen terrific results, considering it’s [not yet] national [available all Comcast customers]. We launched during the week of Thanksgiving, which is a nice time to launch, because there’s a lot of purchasing going on. We launched ‘Despicable Me 2’ and ‘Fast & Furious 6,’ and we were very happy with that.
“We have [EST] available in 22 million households. We launched in on all platforms at the same time: set-top boxes, our X1 operating system box and online. It’s been terrific. There’s so much opportunity that.”
DEG’s Smith added, “From a studio perspective, we were watching one title, and the results were enormous. It showed us that if you put actually put something right in front of the consumer and all they have to do is push a button that they will and that they want the content. We should be giving them more content, anytime anywhere.”
Comcast’s Baker said, “It really fills a gap where people might buy things that they may not otherwise. Often, we’re selling the digital version before it’s available on DVD. We’re going a kids’ movie sale right now … where every day this week, we’re offering another movie for a dollar [extra] … It’s good for impulse purchases. I bought ‘Stuart Little’ for my kids last night … We do have a way for customers to download this content in perpetuity so that even if they do leave Comcast, they can still own it.”
With so many ways to watch content on demand, one area where there is room for improvement is to make it easier for people to find content on demand, says iN DEMAND’s LoFrisco. “We launched a Rent Movies on Demand website and still maintain that website … We’re working with partners like Comcast to create monthly stunts. There are thousands of titles go into these stunts, with the whole purpose being creating a simplified path for the consumer. Make it easy for them to find what they want to watch.”
DEG’s Smith commented, “The best job we can do is simplify things for consumer, whether it is a video rental, so that everything starts to look seamless. I kind of liken it to an iPhone or a smartphone, where you can swipe them and then go over to TVs and swipe your TVs.”
Smith added, “We’re about to see explosion of not just TV Everywhere but Movies Everywhere and Content Everywhere and allowing consumers to get consumers to get what they want when they want.
As for the future of VOD, iNDEMAND’s LoFrisco said, “I still think movies still are sexy and will stay sexy. I think it’s about the portability of content and the notion of how you help consumers find it. If you’re content resides in multiple places, it’s about how you make it more comfortable for the consumer.”
Comcast’s Baker had this prediction: “I would hope that [it’s about streamlining] user names and password and we move beyond that to auto-authentication to live across different paths and work together.”