Timing Video On Demand Launches Could Be Crucial For Cable Companies, Says Myers

“The long-term vitality of the cable industry, and the ability of both television and online programmers to expand their revenues through digital and high-speed connectivity, rests on the success of cable operators in successfully marketing and delivering these services to consumers,” says Myers.

The Myers report also claims that most cable groups’ results to date have been mixed, “with lower than expected performance in basic subscriber growth, declines in digital video penetration and lower than expected 2002 growth projections.” Certainly, the two major UK cable companies, NTL and Telewest, are both carrying heavy debt burdens (see NTL In Talks For Further Investment, Says FT).

Selling the bundle Myers singles out Cox Communications in the US as one group which has managed to successfully implement the ‘bundling’ of telephony, television and, now potentially, interactive services. Other major operators have been less successful in selling bundled communications services. The result of this is that Cox is one of few companies that are not now relying on VOD and advertising revenues to meet their growth and financial targets.

“Cox is the only company we know of that is delivering on the long-awaited promise of bundling,” Myers quotes from a Lehman Brothers report.

First impressions last The worry for cable operators, both in the US and elsewhere, is that consumers’ first impressions of VOD are likely to last. If the service is not up to scratch at launch – as has been the case with many digital TV services launched in the UK – users will be quickly switched off to the idea.

This leaves cable companies in something of a quandary. Should they roll out VOD in the hope of recouping revenue, or should they write of targets for 2002 and 2003 and develop the system more substantially?

As Myers says, operators have been left with a choice between: one – lower growth rates in 2002 and 2003; or two – rapidly deploying interactive services, such as VOD, to offset slowing growth rates in video and advertising, says Myers.

“[This] is extremely relevant to understanding the importance of VOD and interactive services to the performance of cable operators in 2002 and 2003. Industry analysts have recognized that many of the emerging interactive platforms have been put on hold until digital services are rolled-out and advanced set-top boxes deployed.

“However, financial pressures are requiring that operators accelerate the introduction of new services, often before consumer demand has been established and without sophisticated marketing campaigns,” warns Myers.

Comment The US cable operators, in the transition to digital and interactive TV, will likely be looking closely at developments in the UK market, currently a world leader in the adoption of digital TV (DTV).

A degree of interactivity on DTV services in the UK has been around for a while now, although many services were less than refined or thoroughly tested at launch.

For Insight Analysis on the future of interactive TV services click Insight Analysis: The Struggle For Interactive Television.