Cable, Satellite Outfits Vie for Video on Demand Edge - TheStreet

Cable TV operators are pitching video-on-demand and its variations as the next rocket for boosting subscriber revenue. But, says one industry veteran, VOD won't long be a feature distinguishing cable from its satellite industry competition.

That outlook -- one that reflects self-interest, to be sure, as well as accumulated wisdom -- accompanies some recent announcements that home satellite services are launching experimental ventures in VOD. The service permits home subscribers to watch whatever movie or show they choose from a programming menu, at whatever time they want, with the ability to pause, fast-forward or rewind as if they were watching a tape in their own VCR.

If successful, the satellite operators would have one more tool in their ongoing fight for market share with cable television operators, who regard advanced services such as VOD, high-speed Internet service and telephony over cable as defensive plays against cable encroachment, as well as drivers of revenue and cash flow growth. Advanced services hold increasing promise to investors as basic subscriber growth slows.

Rollout

For now, cable has the apparent advantage in VOD, which can be marketed on a pay-per-view basis, as a subscription service in which consumers pay a flat monthly fee for unlimited access to a menu of programs, or as a free service. With the programming stored on computers at a cable operator's local offices, operators can amass large libraries from which subscribers can select.

Comcast

(CMCSK)

, for example, is planning a library of 1,500 hours of free and subscription VOD -- also known as SVOD -- in a venture to launch later this year in Philadelphia.

That would be a service that satellite operators would find impossible or impracticable to match because they don't have enough satellite capacity to send individualized feeds to subscribers, and because digital video recorders in advanced satellite set-top boxes don't have the capacity of a centralized cable-system video library.

Starzgazing
Starz Encore's VOD service will be tested by DirecTV this summer

Source: Starz

Just you wait, says John Sie, chairman and CEO of Starz Encore Group, the premium movie service owned by John Malone's

Liberty Media

(L) - Get Report

. Like Moore's Law, which predicted the development of ever-more-powerful computing chips, it's inevitable, says Sie, that the hard-drive capacity of digital video recorders will increase.

So within three years, he says, DVRs will have 400 hours of storage capacity. That compares with the 35-hour storage capacity of the satellite receivers marketed by

Hughes Electronics'

(GMH)

DirecTV service incorporating the

TiVo

(TIVO) - Get Report

digital video recorder.

Teaming Up

"I always tell my cable brethren that technology is neutral," says Sie, a three-decade veteran of the cable and satellite industries. "SVOD is a great, powerful concept. And if it's a great, powerful concept, then any platform is going to adopt it." Given American ingenuity, "No one should assume that the competitor cannot do something."

Admittedly, Sie doesn't have a neutral position on the subject. On Thursday, Starz Encore announced it was teaming up with DirecTV and TiVo on a test of SVOD over satellite this summer. But he's right in that if an idea is attractive enough, everyone will try to figure out a way to get into the act.

Last week, for example,

EchoStar Communications

(DISH) - Get Report

-- DirecTV's current rival and possible merger partner -- said last month that it and

SBC Communications

(SBC)

were in discussions about teaming up to develop VOD and other advanced services.

Though the technology isn't quite there yet for satellite VOD, evidently the desire is.