A silent revolution stalks Hollywood’s well-heeled offices. Fox, ABC & CBS have all witnessed a steady decline in their ratings and advertising revenues since the dawn of digital media. A nation once fed a diet of generic TV shows and sit-coms, designed to draw mass audiences into the jaws of advertisers, is now fragmenting into a thousand niche markets which have quickly become accustomed to watching what they want, where and when they want. An era spent fighting over the family television remote has given way to personalized viewing on computers, iPods and bedroom TVs.
In what has become a perfect socioeconomic storm, the falling costs of video production and Internet broadcasting have correlated with a collapse in mass audiences and advertising revenues. A new breed of broadcaster has arrived; lean & hungry, they pander to every minority taste and whim, whether the penchant be for high fashion, fly fishing or women’s wrestling. The new breed generate revenues through subscriptions and from dedicated advertisers of niche products, to whom their targeted content appeals immensely. Sports that were once hardly ever illuminated by the cathode rays of mainstream television now have their own dedicated channels, and the once proud broadcasters of such prime time hits as the Miss World contest have seen their viewing figures disintegrate to niche market levels.
Aside from a widely unforeseen public appetite for downloading homemade video clips from the Internet (a mass market which now accounts for almost 20% of daily Internet traffic on YouTube alone), there has also been strong growth in the numbers of specialist broadcasters such as Fashion TV, Playboy TV, and The Poker Channel, all of which offer a more polished online product. Although many CEOs once dismissed such micro markets as being too small to be commercially viable, the new breed have in fact demonstrated that matching a niche product with its natural audience attracts both subscription revenues and premium advertisers who can at last reach their target market.
The advent of the webcam and Internet broadcasting have ushered in many social and technological revolutions, including those of webcasting, videoconferencing, and the gradual amalgamation of the computer and the television set. Although perhaps more widely seen than heard, the silent digital revolution has also given rise to streaming Video On Demand technology, or VOD. Many new broadcasters have arisen to take advantage of this emerging technology, as the once formidable financial barriers to entry into the broadcasting market have come crashing down. Among the new pretenders are Joost, Tivo, MSNBC, Virgin Media, and of course Google’s YouTube. Virgin Media has already become one of the top players of the VOD revolution, joining MSN and YouTube at the apex of the pyramid, while Tivo, Playboy TV, Joost & Fashion TV have focused their attentions upon niche markets.
He who delays is lost, and major broadcasters such as NBC and ABC have already begun streaming their prime time TV shows to Internet viewers. Likewise those who have foreseen the death of the DVD are also moving on to fresh pastures. One DVD rental company, ‘Netflix’, has already begun to offer ‘click-and-view’ subscription services which stream full length films and television episodes to a variety of platforms - although once again there is strictly no downloading. It is not just the old dogs who are reinvesting in new tricks, as the emerging VOD market is perceived to be so potentially lucrative that many new companies like Joost and ReelTime are being created to siphon money from technology’s latest tidal pool. Some companies are even boasting that their new ‘no stop, no buffer’ services are of such high quality that you can actually hook up your television to the computer output. Although many of the shows and films being streamed are old, much of the content that is currently offered is not only new, it is even being produced exclusively for broadband VOD TV.
For industries as visual as those of fashion and modeling, VOD must appear a very attractive means of targeting a new generation of consumers with the latest brands and faces. It is not that the reduced costs of VOD are a primary issue to the industry as, after all, the cosmetic, magazine and fashion industries are hardly short of a dollar or two. It is rather the vast flexibility that VOD affords which allows fashionistas and lovers of beauty alike to watch their favorite shows, either live or pre-recorded, where and when they choose, from their offices to their weekend holiday cabins. Market pioneer Fashion TV relaunched its official site in 2005, broadcasting its very own VOD service to Diamond Club subscribers.
On Labour Day 2007 Playboy TV finally launched its new look Subscription Video on Demand (SVOD) service, just as the tide of profitability was finally starting to turn in its favor. Playboy TV’s US revenues, including its VOD and pay-per-view (PPV) business, had increased by 4% to $21.6 million by the 2nd quarter of 2007, largely due to a better understanding of how to market and operate its adult VOD subscription service. This declaration of profitable trading was all the more impressive given the high cost of setting up the VOD networks and a background of rapidly declining PPV revenues. Thanks largely to VOD, Playboy is now back in the black, and the Company certainly has the product and the prestige to hold its own against the new wave of adult content providers. The growth in Playboy TV’s VOD revenues has resulted from both an increase in the number of paid downloads and subscribers, rewarding many years of patient investment in programming, marketing, and consumer research. Playboy's new SVOD service, originally launched on Cablevision in 2002, has since been picked up by a number of leading cable operators, including Comcast and Rogers Cable of Canada.
Other leading content providers have been quick to join the VOD revolution, with Vivid and Digital Playground both now producing content exclusively for release on VOD. Meanwhile collapsing DVD sales and online theft are driving content producers towards more secure HD/Blu-ray formats as part of a bold initiative to increase quality and reduce piracy. The consumer is however is always right, and when it comes to accessing adult content, digital VOD versions are outselling their optical counterparts by a factor of three. All titles currently offered by Digital Playground are protected by Windows Media Digital Rights Management (DRM) technology and require a special Microsoft security patch to allow them to be viewed. Some of those in the industry however remain skeptical that HD/Blu-Ray optical media technologies will ultimately defeat the pirates, and many are planning to release all new content exclusively via VOD, a technology that theoretically prevents files from being saved to disc. One film producer has gone still further, announcing that in future all content will only be released via his website in HD VOD format using heavy Windows Media DRM restrictions.
Video streaming has quickly become one of the Internet’s most popular technologies. With its potentially limitless applications, an end user requires only a web browser and a broadband connection to access a virtual universe of content. From education to video conferencing, the future is here today and it is only our collective imagination and social inertia that stand to limit the progress of this new technology. The power of VOD networks is being constantly increased through the creation of massive banks of dedicated servers and an expanded provision of ADSL/SDSL/VDSL, wireless, satellite and optical cable networks. VOD applications powered by advanced compression capabilities, parallel streaming through multiple networks, and highly flexible content management software will permit media companies to encode, upload, manage, categorize, report, bill, and advertise within the same platform. Such advanced and affordable technology will enable small production companies to set up new services that are ultimately scalable for all markets, great and small.
Although VOD technology might appear to have sprung up overnight, the trial of the very first VOD service in fact dates back to September 1994 when it formed a major part of the Cambridge Interactive TV trial. This pilot VOD project sought to provide parallel video and data streams to hundreds of homes and schools which were connected via the Cambridge Cable Network, a service which went on to become part of the NTL cable TV & broadband company, and later Virgin Media. Kingston Communications launched the first successful commercial VOD service in the UK in 1998, and also pioneered the integration of broadcast TV and Internet access to subscribers by means of a single device using IP delivery and an ADSL network. It was not however to be until 2005, when cable TV providers Telewest and NTL launched their own VOD services, that the dominance of BSkyB’s satellite-based UK network would be challenged. Duly threatened, BSkyB countered with their own broadband VOD service called ‘Sky Anytime’ in 2006, as the widespread distribution of a single signal made streaming VOD impractical for most satellite TV systems. Sky has employed a so-called ‘peer-to-peer’ approach using Kontiki technology to provide very high capacity multi-point downloads of video which capture content from multiple users within the system who have already downloaded it, rather than depending exclusively upon the bandwidth of Sky’s own host servers. Now most major European broadcasters have entered the VOD race, fearing omens of a commercial rout. By the end of 2006, over 140 subscription-based VOD services were already in operation across the European Union.
In the future, a bewildering range of choices will become available to the consumer, and media selection will increasingly be made via keyword searches rather than through published schedules. The vast selection of channels that will appear will be bundled into ‘master’ packages, each designed to cater to those of a certain disposition, such as extreme sports or fashion shows. Virgin Media Cable TV already offers TV ‘On Demand’, presenting a virtual vault of thousands of pre-recorded TV shows and films, in addition to its existing repertoire of standard linear (i.e. live) channels. Virgin Media’s VOD audience alone has already outgrown that of leading broadcaster Channel Five, claiming some 3.5 million paying subscribers, in addition to revenues from ‘pre-roll’ advertisements which are integrated into videos at CPM rates that are five times higher than those of traditional banner ads. Although Virgin Media’s range of services has diversified to include TV, Internet, telephony and mobile, there has been the advantage of a consolidated billing system. With its declared intention to launch a 50Mbps broadband service in 2008 via its new fibre optic cable network, Virgin Media is poised to become the world’s largest single VOD service provider. With the promised availability of HD streams demanding 15 Mbps compared to the existing 3.75 Mbps needed for standard-definition VOD, the bandwidth implications and the requirement for new high bandwidth optical cable networks are self-explanatory. Other network providers such as British Telecom, Tiscali, Sky, ITV, Channel 4, Channel 5, and the BBC have already entered the fray with their own VOD network services.