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The VOD Era: Can Broadcasters Adapt?

Video-on-demand throws up some serious challenges to broadcasters. What trends are emerging and what business models will help them survive, asks Michael Nutley...

Video-on-demand throws up some serious challenges to broadcasters. What trends are emerging and what business models will help them survive?

By Michael Nutley of



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One of the developing trends in the world of interactive TV is video-on-demand. It’s been a long time coming, but cable networks Home Choice, NTL and Telewest are all rolling out services over the next few months. Meanwhile the BBC is developing its media player with the aim of offering an on-demand archive of its TV programming in the same way as the radio player currently does for its radio output. Even BT is looking at a content play, with its current plans to wrap on-demand video content around a Freeview offering.

And these are just the early stages. The UK already leads Europe in illegal downloads of TV programmes. At the same time, broadband penetration means illegal downloading of films is now seen as a similar threat in Hollywood as music downloads have been in the record industry. Meanwhile PVRs, which failed to make a significant impact in the UK market initially, are predicted to take a much bigger slice second time round, being pushed as they are by both Sky and the big consumer electronics firms. And while most of the controversy around PVRs has to date focussed on the ability to skip ads, their ability to record programmes, particularly when combined with DVD recording to allow you to archive your favourite shows, is another vital strand in the evolution of an on-demand culture.

Consumer control pushes forward

In other words, we’re seeing another example of what OgilvyOne chairman and CEO of OgilvyOne worldwide, Brian Featherstonhaugh recently called “the only trend that matters” – consumers taking control of communications. Everywhere you look in media, you find yourself facing the same set of issues: that whenever consumers are offered tools that allow them to control a medium, they seize them with enthusiasm. In journalism, it’s blogging and RSS; in advertising it’s PVRs, pop-up blockers and the telephone preference service; in broadcasting, it’s video-on-demand. And in every case the big question is how to make money in this new environment. Or rather, how can the established companies continue to make money?

But there is another question to be asked here, and that is whether technology is driving us up a blind alley. Or, to put it more specifically, if you have the choice of watching everything, will you ever actually watch anything?

Fragmentation versus community

Someone in the television industry put this question to me at the recent launch of Herfordshire Creative Industries. He was arguing from his experience, which I’m sure is familiar to most, that he has shelves full of videocassettes of programmes that he has taped, but never watches. The time never seems to be right, or there’s something else on, or he doesn’t feel like watching anything he’s got. And he was predicting a backlash against video-on-demand, and a move back to event television, where what matters is watching something live and discussing it next day with friends or colleagues, who’d all watched it at the same time.

Business models for the VOD era

To a certain extent this trend is already happening, as a response to audience fragmentation caused by increasing numbers of channels, and therefore consumer choice. Broadcasters believe that sport is the “killer app” in this situation, the one thing that has to be watched live to be truly enjoyed and appreciated. Now, with reality television, there’s an increasing amount of programming that aspires to the quality of sport.

It’s possible to imagine a future where video-on-demand has driven most broadcasters to a model that looks more like retail, with a strand of event programming running alongside. But if video-on-demand turns out to be an illusion, and viewers are paralysed by choice rather than liberated by it, will the revenues from programme sales be enough to replace those lost from advertising? Or will we see a shrinking in the number of channels on offer to match the changed economics of broadcasting.

Michael Nutley is the editor of New Media Age.