Video on Demand is Changing the Way We Watch TV, and That’s Good for Everybody

By Adam Flomenbaum 

1Sometimes, playing catch up isn’t a bad thing.

Video on demand (VOD), a long-time content consumption afterthought, is now promoted by TV networks, embraced by advertisers, a focus for cable service providers, and used frequently by consumers.

Matt Strauss, Senior Vice President and General Manager, Video Services for Comcast Cable, has been working in the VOD space for a long time and in a phone interview last week with Lost Remote, pinpointed the service’s recent growth to four things:

First is predictability. Historically, consumers would not know which shows were available, how many episodes there would be, or when the content would be loaded after it premiered. Now, the top 100 Nielsen-rated shows are typically made available on Comcast’s VOD platform hours after they first air on linear TV.

Second is ad serving. Programmers now have the ability to swap out ads on VOD just as they have been doing online.

Third is measurement. C3 viewing (Nielsen’s metric for commercial viewing which includes day of broadcast plus three days) has historically only included live viewing and DVR viewing, but now includes VOD.

Fourth is audience. 70% of Comcast subscribers now use VOD services, with a 100% increase in time spent viewing TV content on VOD in the past three years.

More than anything else, predictability has set VOD in motion. An extensive and current content library has allowed consumers to discover shows and to catch up on them, which in turn leads to a return to live TV. Until recently, viewers who missed the boat on a show had to wait until a season ended to catch up on Netflix. Before that, it was via DVD box sets.

Comcast releases a weekly list of the top 20 most viewed shows on its VOD platform. Sometimes the list mirrors the Nielsen ratings, but sometimes it doesn’t.  The implications of this to networks and to advertisers cannot be overstated: audiences are now expanding in season rather than after the season. And whether this results in live TV viewing or in plus-three viewing, more ads are being seen within an important window.

“We’re finding that through on demand we’re seeing an increase in commercial viewing,” Strauss said. “On average we’re seeing about a 20% increase in commercial viewing during the C3 window in Comcast households and that’s even higher than 20% when we look at series that are stacked with a full season. It’s an interesting footnote because I think that there’s a lot of misperceptions around how on demand is viewed and used and I think binge viewing has been miscast, with respect to what we’re finding, in how customers are truly looking to enjoy the video.”

Commercial viewing on VOD goes up because fast-forward is usually disabled. There are not as many commercials as there are during live TV broadcasts, but unlike with DVR, networks and advertisers can at least guarantee that a viewer sees them.

DVR, though, is still an important part of Comcast’s business. Whereas VOD is a “free” add-on for existing Comcast cable subscribers, DVR costs extra each month and is thus another source of revenue. Strauss mentioned that 50% of households have DVRs, and the company continues to enhance the product. “It’s a very passion driven experience which is what also led us to innovate our DVR and move it into the cloud, but the limitation of the DVR is that it can only record what’s aired live.”

If the DVR isn’t replaceable quite yet, its limitation is an opportunity for VOD.  In partnership with networks Comcast has experimented with innovative forms of time-shifted viewing. What if – Strauss suggested – VOD is the first window, live is the second window, and DVR is the third window? The reason to explore this is the chance to pull an audience forward in an on demand window where fast forward is disabled around the ads.

FX tried this with ‘The Bridge’ so that episodes were available on demand a week earlier than the linear premiere. We have written about networks that explore pre-releasing episodes via their mobile and tablet apps as a way to boost download numbers, but Comcast – and FX-  were interested in seeing whether they could migrate viewers from a DVR experience to an on demand experience and whether they could actually expand the audience of a show in season.

“We were able to do both,” said Strauss. “We had significant decline in DVR usage for that show once we tested this early window and we had, as you would expect, a significant spike in on demand usage for the show. But, we were also able to bring in a new audience in the end.”

Networks are beginning to understand the power of VOD to capture new audiences, and this upfront season the language began to reflect that. More and more, networks are saying, “Catch up with [network name] on demand” rather than “set your DVR to record the show.” If networks can drive audience to VOD, not only can they monetize that audience better than a DVR, Strauss noted, but also that audience has a higher propensity to then consume the content live or live within three days.

With HBO and CBS last week announcing standalone subscription options, cable service providers must continue to innovate and provide extra value to its customers. VOD – with expansive content libraries and, in some cases, early access to shows – is one such value-add; being able to access VOD libraries in different rooms of the house, across devices, is gravy. And hey, if consumers do decide to unbundle after all of this, guess who’s providing the ability to stream content?

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