Baltimore-area cable companies are promising much more than movies and TV shows these days. Viewers can sing karaoke, look for fugitives and get tips for cutting college costs - all as part of an explosion in on-demand programming.
Comcast Corp. has in recent months launched its Scholarships On Demand programming to tell students and their parents about available local scholarships, Fugitive Files On Demand to give viewers access to police photos and descriptions of accused criminals on the run, and Troop Greetings On Demand, which allows families of service personnel to watch video greetings from their loved ones. That's in addition to its more traditional on-demand programming.
Verizon Communications Inc. stands ready to compete, with its FiOS TV customers having access to a library of thousands of on-demand titles from movies to talk shows to children's programs, as well as offerings such as karaoke and CNET consumer electronics product reviews.
On-demand programming has not only changed how consumers watch television - what they want when they want - it has changed competitive strategies as cable providers and phone companies invade each others' traditional turf.
"You need to have some kind of video capture, a way for someone to add convenience to broadcast," said Andrew M. Schroepfer, president of Tier 1 Research, a Minneapolis research firm that focuses on technology and the Internet.
"The mega-trend that continues to happen is, it used to be up to the content owners to tell us when we could watch shows, and now that has changed," Schroepfer said.
Indeed, on-demand programming has become so popular that even as competitors battle fiercely for customers, they all agree on its necessity - though some analysts believe the technology could be someday eclipsed.
"I think it's an absolute must," said Tricia Lynch, director of FiOS TV programming for Verizon.
"Consumers are looking at keeping up with popular culture, but on their own time. ... Having [video on demand] allows you to keep up with your favorite series or catch up with the series that everyone's talking about," Lynch said.
"It's totally revolutionized the way that people are watching television," agreed Michael A. Doyle, president of Comcast's eastern division. "People don't even know what night their favorite show is on anymore because they're either watching it on demand or they're DVR-ing it."
Video on demand and subscriber video on demand (for subscription channels such as HBO) was estimated to be a $1.15 billion market last year, up from $800 million in 2005, according to the consulting and research firm the Convergence Consulting Group.
The market is expected to reach $1.6 billion in 2007.
In Comcast's eastern division - which includes Maryland, New Jersey, Pennsylvania, Delaware, Washington, Virginia and North Carolina - more than 60 percent of homes the company serves have a digital box that gives them access to Comcast's on-demand library.
Doyle said that number continues to grow, and nearly all new customers are digital subscribers.
In the Baltimore area, 80 percent of Comcast customers have used video on demand in the past 90 days, with the average user accessing 18 programs a month, according to the company.
Comcast has about 8,000 titles available, most of them free. That number can be higher as the cable company adds and drops programs over the course of each month.
In January, for instance, Comcast digital subscribers in the Baltimore market had access to nearly 10,000 on-demand titles, the company said.
"We want to drive heavy usage to On Demand and basically change the way people watch television. That's why 95 percent of our content is free. That's why 95 percent of our content will remain free," Doyle said.
Eric Bonardi and his wife, Elizabeth, turn to Comcast On Demand about three or four times a week to watch newly released movies, use exercise programs or catch up on HBO series. On Sunday nights, for instance, Eric Bonardi usually has to work from home, so the couple watches Rome - the HBO series that airs Sundays at 9 p.m. - together Monday nights on demand.
"All of the different HBO series, we love to be able to catch up on them," Bonardi said, adding that the couple also uses Comcast On Demand "to bring us up to date before a new season."
Launched in 2002, Comcast On Demand has grown into a significant contributor to revenue. Comcast added 1.9 million digital cable subscribers last year, up 59 percent from a year earlier.
The company's pay-per-view revenue hit $633 million in 2006, up 27 percent from 2005. Comcast's total 2006 revenue was $7 billion.
"Customers like it, so really, beside the additional revenue, it's delivering a service that the customers want, and that allows them to keep their customers at the current rates that they're charging," said Kent Custer, a cable and telecom analyst for A.G. Edwards & Sons Inc. in St. Louis.
Comcast's digital service packages, which include on-demand programming, start at $51.25 a month in some areas and go as high as $107.95 when all movie and premium channels are included.
Customers can also bundle digital cable with Internet and phone service for $99 total.
End to analog
While almost all new Comcast customers sign up for digital cable, analog cable service is still available - though not for long. All broadcasters, including Comcast, will offer only digital services come February 2009, when the federal government will require them to stop all analog transmissions.
Comcast, one of the early pioneers in the on-demand game, gets its on-demand titles through agreements with programmers and distributors, who provide most of the content at no cost. Doyle said Comcast's library of titles is increasing every month.
In addition to movies and television shows, the company provides programming such as Dating on Demand and Troops On Demand. While producing such programming is "the right thing to do," Doyle said, the offerings also enhance Comcast's image and good will.
"We think the more things you can do that address people's individual needs is going to mean a more loyal customer," Doyle said.
Offering free services and programming also greases the skids for a pay model down the road, said Custer, the A.G. Edwards analyst. Consumers might be hesitant to try a new technology that costs them money, but willing to pay for it once they know and like it, he said.
Phil Leigh, senior analyst at Inside Digital Media Inc., a technology research firm in Tampa, Fla., argues that the impact of on-demand programming isn't as big as Internet video's potential impact on consumers. In 2006 it became evident, he said, that Internet video is the wave of the future and video on demand is approaching an "evolutionary dead end."
With the cable companies, customers must first become digital subscribers and pay fees before viewing movies, and in some cases the movies come at a cost as well, he said.
"There are a lot of thresholds you have to cross before you have the privilege of watching a movie on demand," Leigh said.
The Internet, however, allows consumers to watch videos free, from TV programs that the major networks post on their Web sites to videos on YouTube, he said.
And consumers are recognizing that there's no reason they should have to pay for content. While the picture on Internet videos is smaller and the quality not as high as watching cable television, Leigh said, these are technicalities that can be worked out.
But Brahm Eiley, president of the Convergence Consulting Group, says the Internet isn't even a factor in the on-demand race. ABC, for instance, broadcasts its leading shows on its Web site the day after they air on the network and about 3 percent of their viewers are watching them, he said.
By contrast, Comcast says that in its eastern division, there were 495 million orders for free on-demand content last year, up from 393 million in 2005.
"The Internet is not going to take off tomorrow with traditional content," Eiley said.
Companies such as Verizon and Comcast hold the key to the Internet because they control the networks that carry the content, he said. So they could charge more when customers use more bandwidth to, say, access additional online content.
Meanwhile, Comcast has distinguished itself among competitors with its large library of titles, Eiley said. And now the company is pushing to move the release date for Comcast On Demand movies closer to the DVD release date. (Movies are typically available on demand 30 to 45 days after their DVD release, he said.)
Some analysts don't consider satellite companies a competitor in the on-demand race. DirecTV, which has partnered with Verizon to bundle its television service with Verizon's Internet and telephone services, does not currently offer on-demand programming. The company is, however, getting ready to launch DirecTV On Demand at midyear with more than 1,000 titles, said Jade Ekstedt, a company spokeswoman.
Verizon also has been steadily rolling out its own fiber-optic television service FiOS TV - a multibillion-dollar bid to win the convergence battle.
The phone company is spending $22.9 billion from 2004 through 2010 to build its fiber-optic network.
In the Baltimore area, FiOS is available in parts of Anne Arundel and Howard counties, and the company recently reached a franchise agreement in Baltimore County. FiOS customers with a set-top box, which most subscribers have, also have access to Verizon's on-demand programming.
Verizon gets its on-demand titles through agreements with programmers and a major distributor. The company declined to discuss financial details of those deals.
Thousands of titles
But Lynch, Verizon's director of FiOS TV programming, said the company's on-demand library is stocked with 8,600 titles, about 65 percent of them free. Not all of those titles are available at all times.
When FiOS TV was launched in Prince George's County last month, for instance, the company offered a "Premier" package that it said included "access to more than 5,000 on-demand titles," 60 percent of them free.
On-demand is a major retention tool for Verizon because the likelihood of customers dropping service once they have tried Video On Demand is much less than if they hadn't, Lynch said.
Verizon's free offerings include informational programming, educational shows and sports, such as NFL programming. The company has also started carrying niche programming, such as its Karaoke On Demand package that runs $7.99 a month.
Lynch says the company's extensive library keeps it competitive. She said Verizon plans to have a library of more than 10,000 titles available a month by midyear.
"We're right up there with [Comcast] in terms of the number of titles we offer, so it eliminates VOD as a reason for customers not to take Verizon," Lynch said.