NEW YORK — In light of such recent infopike obstacles as Time Warner’s announcement of technological glitches in its Full Service Network, many have been sounding the death knell of the info superhighway.
For pay-per-view providers, however, the fun may just be starting.
Some industry-watchers speculate that, in the near future, the big bucks may not come from fully interactive television systems but from enhanced pay-per-view channels.
Recent tests seem to indicate that, even if the bugs were to be worked out of video-on-demand hardware, the full-service net model is too costly to deliver to subscribers on a national basis.
“There’s only one thing that will determine the rollout of the Full Service Network, and that’s determining a viable business model,” says Mark Stahlman, New Media Associates Inc. prexy.
An ongoing test of consumer interest in pay-per-view vs. video-on-demand has yielded some startling results, according to some industry-watchers. Tele-Communications Inc., US West and AT&T have been running a test system in Denver that offers 24 channels of PPV movies (with 12 more soon to come) as well as 1,500 movies-on-demand in order to gauge which service is more popular with viewers.
The three have been tight-lipped about the test’s results. In November, it was revealed that subscribers were purchasing an average of 2.5 movies per month; a breakdown of PPV vs. video-on-demand was not given, however.
“It was our understanding that, at the end of the day, there wasn’t that much difference in buy rates (between PPV and video-on-demand). It’s a no-brainer — you put money on near video-on-demand because it’s a fraction of the cost,” says Larry Gerbrandt, a senior analyst at Paul Kagan Associates Inc.
Major multisystem operators may be doing just that.
TCI, it seems, is now hedging its bets by concentrating on both services simultaneously. The MSO recently inked an agreement with Microsoft, the computer software developer, to test a fully interactive cable system (including video-on-demand).
At the same time, however, TCI has been readying itself to provide enhanced PPV options. According to VP of corporate communications Bob Thomson, a much-touted order of over 1 million cable boxes was for converters that merely accommodate digital compression (extra channel capability) and are not fully interactive. Such converters would allow the cable operator to send many more channels into the home, some of which would most likely be used for additional premium services, including enhanced PPV.
With fully interactive video-on-demand services a good many years away, analysts speculate that MSOs will be more likely to adopt additional PPV services in order to provide services that aren’t regulated by the Federal Communications Commission.
“Short term, this is the model,” says Gerbrandt.