Company ventures to odder edge of television content.

REMEMBER the days when the word "television" conjured up thoughts of sitcoms, cop dramas and miniseries? Those terms hardly translate in today's emerging world of video on demand, or VOD.

TVN Entertainment Corp. in Burbank, one of the biggest VOD players, has developed entire channels without scripts, actors or even cameras.

For example, digital cable subscribers can access Karaoke Channel and sing along to 15,000 tunes around the clock. Ambient.TV, another TVN channel, provides "motion paintings" made from moving art images to "enhance home decor during downtime for the TV set," according to the company.

Last month, TVN launched the Caught on Demand channel. It features imagery compiled from surveillance cameras, police video and personal cell phones. Here the content comes in episodes, albeit only five to seven minutes long. A host presents an episodic theme such as "Amazing Crashes" or "Dumbest Criminals."

"We have launched with 15 distribution partners and now are available in 2.5 million households," said Doug Sylvester, TVN's chief operating officer. "By TV standards, those are big distribution numbers in a relatively short time."

VOD has come a long way over the past 20 years. Initially, it was most often a pay-per-view service on cable TV. Today, TVN's direct customers are large cable operators, satellite TV companies and telephone companies. Its client list includes Charter Cable, Comcast, Cox Communications, AT&T and Verizon.

Currently the U.S. has about 30 million VOD-enabled households, a number projected to increase to 65 million in the next three years.

While that looks like good growth on paper, a report from Florida-based Innovista Research Inc. found that the early adopters of digital cable--a technological prerequisite for accessing VOD programming--have embraced the VOD platform, but general market consumers remain in question.

"Operators will have to invest a great deal in time and resources to get 'late-stage' or reluctant digital subscribers to order VOD," the report stated. "An increasing number of cable subscribers are being forced by operators to take digital as part of their basic service platform. To many of these customers, digital basic is their lowest choice of services, so they tend to be less likely to order PPV (pay-per-view), VOD or premium programming."

According to Todd Goodwin, president of Innovista and co-author of the report, the cable industry hopes VOD will justify the $70 billion in technology upgrades since the mid-1990s.

Free content, paid content

To generate revenues, VOD uses different business models depending on the content and the distributor. For movies, adult fare, concerts and boxing prizefights, viewers pay a fee that shows up on their next cable or telephone bill, just like pay-per-view. Costs range from $1 for an old movie up to $50 for a fight package, according to Sylvester.

Other types of content are sold via subscription. For example, customers pay once a month for the Karaoke Channel and can sing as many songs as they want.

Free VOD ranges from a children's channel to infomercials. Premium cable channels such as HBO and Showtime allow their paid subscribers to see reruns for free on VOD and broadcast networks and cable networks such as MTV also offer their product without charge.

"In the categories where there is no fee, we usually are paid by the programmers," said Sylvester. But in some cases, the cable company offers a service free and pays TVN an "affiliate fee" amounting to few pennies per subscriber, much like a regular cable channel.

"It really depends on the business model the distributor prefers," said Sylvester. In the case of Caught on Demand, "Charter Cable offers it as a monthly subscription, while Comcast prefers the free-to-consumer model. And we have the opportunity to sell advertising."

Yes, advertising. The traditional revenue model for TV has made the jump to VOD thanks to broadcast networks and cable channels that bring their advertisers with them to the new distribution system.

But in VOD formats not designed around advertisers, it gets dicey. In a compilation of short clips like Caught on Demand, the ads would run longer than any other segment. As a result, often the only VOD ad windows occur for 30 seconds before and 30 seconds after the program.

Besides the standard TV spot, VOD has the potential for new types of marketing. CNET, the network of technology-focused Web sites, has its own VOD channel on the TVN lineup. TVN also produces Expo, an entire channel of extended infomercials.

Large marketers could go beyond that, Sylvester hopes, by creating their own channel devoted to niche consumers.

VOD's future

TVN aggregates content from the Hollywood movie studios, 60 television networks worldwide and a plethora of specialty programmers. All told, its network of more than 100 cable operators and telecom partners distribute 3,000 hours of programming every month.

The company started in 1988, providing programming to backyard satellite dish operators. Investment firm Morgan Stanley owns a majority of TVN stock, with the remainder held by private equity funds.

VOD's future faces stiff competition from regular cable, DVDs and even the Internet. With Internet protocol television, for example, video programs download directly into a desktop computer, and eventually the desktop user could even modify the video.

The London-based consulting firm Digital TX predicted that "although it will not appear overnight, Internet protocol and transactional delivery will be the dominant method of broadcasting in 10 years."

By JOEL RUSSELL

Staff Reporter