David Chastain has been hooked on HBO On Demand since he got it two months ago.
HBO On Demand gives subscribers control over when they view programs, unlike regular HBO. The digital cable video-on-demand service allows Chastain the opportunity to watch shows such as The Sopranos and Band of Brothers whenever he wants.
He says that flexibility has made his entertainment experience better, something cable operators hope will help them keep their customers as Internet entertainment companies prepare to deliver music and video-on-demand to the PC.
"I watch it all the time because you don't have to worry about something being on at a certain time. Before, I would flip through 100 channels and couldn't find something worth watching. But on HBO On Demand, there's always something good," Chastain said.
"You can watch it anytime. It's like watching a VHS tape or DVD."
Video-on-demand is like having access to a virtual video store with no tapes or late fees to worry about. It not only gives viewers absolute control over viewing times, it also offers VCR-like functionality: Viewers can pause, rewind and fast-forward programs.
Internet video-on-demand services such as SightSound.com let viewers download movies to their PCs, while Starz On Demand and HBO On Demand run through a set-top box attached to a television.
HBO's original programming drives the popularity of the service, said Jeffrey Hirsch, a general manager with Time Warner Cable. Films, sports and children's programs are also among the 150 programs offered each month.
Premium cable channels have a distinct advantage in the content area, since some new on-demand services have found it difficult to license the type of content needed to launch a successful service.
A deal between Blockbuster and Enron to provide video-on-demand fell apart in March, in part because of insufficient content.
Movie studios have been reluctant to grant licensing rights to video-on-demand operators since they see the service as a threat to established revenue streams such as videotape and DVD rentals.
Some studios are seeking to launch video-on-demand services of their own, and so have little reason to license content to potential rivals.
In August, Paramount Pictures, Sony, Warner Bros. Pictures, Metro-Goldwyn-Mayer and Universal Studios -- five major movie studios -- announced a deal to deliver video-on-demand through the Internet. A few weeks later, Disney and News Corp announced a joint venture to offer their own video-on-demand service through the Internet and digital cable starting early next year.
While licensing issues have slowed the development of new on-demand services, cable companies are looking to upgrade their networks to get a jump on the competition.
Cable companies have spent billions of dollars to upgrade their systems to allow the two-way interactivity required for video-on-demand and other interactive television services.
"The fact that people want more choice of video on TV is established," said Stephen Effros, a cable industry consultant. "People would like to select the videos they see, whether they go to Blockbuster or take advantage of the large channel selection of cable. Video-on-demand represents a technology-based improvement of a service we know people want."
Over the past five years, Time Warner Cable has spent $54 million dollars in the Columbia, South Carolina, area alone to upgrade to a two-way 750-MHz broadband network.
The steep cost of the infrastructure has limited the success of earlier video-on-demand initiatives, Black said.
Nevertheless, Time Warner Cable spokesman Mike Luftman is confident that consumer demand will make the investment worthwhile.
"One thing we've learned from our experiments with video-on-demand since 1994 is that people want instantaneous control over what they see and when they see it," he said.
July's free HBO On Demand trial in Columbia was so popular, the company's system couldn't handle demand, said Bud Tibshrany, vice president of public affairs for Time Warner Cable in South Carolina.
The ordering software needed to be upgraded to handle 900 program selections per minute, a drastic increase from the 20 selections the company was originally prepared for. Time Warner Cable gradually expanded the test group to 3,500, up from 250, and launched a second test in Cincinnati early in October.
AOL Time Warner plans an aggressive rollout of various digital television services -- including HBO On Demand, PVR and HDTV -- by the end of next year with the help of Scientific Atlanta, the set-top box manufacturer.
"Any television product can be digitized and stored on a server and retrieved," said Luftman. "Eventually, all kinds of programming will be on-demand."
That vision may soon be realized. Video-on-demand and similar technologies will someday allow consumers to access vast libraries of content.
"We had the digital revolution 20 years ago, and now we're seeing the fruition," Black said. "A lot of these (video-on-demand) interfaces look just like the Web. It's just a matter of getting the content out there from the consumer side –- and getting the infrastructure from the business side."
