Why Pay TV Video on Demand Is Underperforming

For the past two years, DTC has noted a slower pace of growth in video on demand (VOD) title sales among pay TV providers. It’s still growing globally, thanks in part to an overall rise in pay TV subscribers, but the growth rates could be better. The cause of this sluggish pace is fairly well known: alternatives such as Netflix are taking their toll. But based on my own recent experience, we can add another: lousy marketing.

For five years, I’ve been satisfying my VOD fix with Amazon’s Instant Video (accessed via my TiVo). My version of Amazon’s Internet VOD isn’t all that “instant” – the Series 2 TiVo doesn’t support streaming, instead, videos are downloaded to the hard drive. This causes anywhere between a 30 minute to two hour wait, depending on network traffic and other variables. That’s typically not a problem for the adults in the house, but it does become a hassle when trying to quickly pacify the children.
Then, by sheer accident, the family discovered that Cablevision, my cable TV provider, offered its own VOD service. (You would think someone who spends an inordinate amount of time in the pay TV world would be intimately familiar with his own local offerings, but then you haven’t heard the one about the shoemaker’s children…). As a basic cable subscriber, I thought VOD was either out-of-reach or too cumbersome to order (anything involving a phone call is a no-no). But lo and behold we found a modest selection of movie titles for instant viewing. Not a lot, but enough for our casual needs.
Videos, particularly new releases, cost about $1 more through Cablevision than through Amazon but despite my penchant for thrift, I’d gladly eat it (I think of it as a ‘convenience premium’).
The net result of this discovery has been anywhere from a $4 to $10 monthly shift of rental cash from Amazon to Cablevision.
The only conclusion to be drawn from this sample size of one is that Cablevision missed the boat, big time: I’ve been a cable subscriber for five years and don’t recall a single piece of advertising – online, on TV or in print – that promoted this service. All that time, Amazon was capturing my VOD dollar (and not making a profit, amazingly).

There’s good reason to believe I’m not alone. Several consumer surveys have noted a serious lack of awareness of pay TV VOD offerings. The industry has even fumbled the more lucrative theatrical release market, where a film is available simultaneously in theaters and via VOD. According to survey by the studio Lions Gate, almost 90 percent of movie goers had no idea that the recent movie Arbitrage was available for viewing on demand on the same day as the theatrical release.

Clearly, more needs to be done to get the word out or Netflix, Amazon et al. will continue to eat the pay TV provider’s lunch. Globally, Netflix in particular has been pushing into new markets. If pay TV providers in Europe and Latin America and other markets targeted by Internet VOD players want to retain their VOD revenue, they’d do well to learn from the failures of their North American counterparts. Or suffer their fate.