The 1.1 million subscribers of Adelphia Communications Corp. in Los Angeles may finally have something to cheer about although they won’t have much choice when.
Time Warner Inc.’s $17.7 billion offer last month to buy the assets of bankrupt Adelphia means that the company’s subscribers in the San Fernando Valley, West Los Angeles and other communities could see greater access to on-demand programming.
For years, cable companies have been talking up the potential of on-demand programming to revolutionize the television-watching experience and help them stay ahead of competition from satellite television companies.
But Adelphia in particular has been lagging in the race to roll out programming for viewers to call up when they want them while TimeWarner has generally pushed the envelope.
“(It’s) offered on-demand to virtually every one of their subscribers,” said Bruce Leichtman, president of Leichtman Research Group Inc., a New Hampshire broadband, media and entertainment consulting firm.
Cable companies have been offering a precursor of on-demand
programming, in the form of pay-per-view movies and other special events, for about a decade. However, those offerings were not truly on-demand since they were only available at specific time windows.
Over the last several years, though, the companies have begun to offer movies, contemporary cable television shows and other programming in true on-demand fashion at the click of a button whenever it’s wanted. This has required the replacement of one-way analog cable networks with digital networks capable of handling two-way transmission of data.
The question now is how soon will be it before Adelphia’s L.A. subscribers see more of the programming and how extensive it will be.
Adelphia, struggling with bankruptcy reorganization, complaints of shoddy service and lagging progress in transforming its analog network to digital, was the last of the major U.S. cable companies to offer on-demand services.
The companies, noting that the deal has yet to be even approved by a U.S. bankruptcy court judge, declined to comment on any specific timelines. But media analysts and the companies say it eventually will take place.
“It’s really the promise of what people expected cable to be,” said Time Warner spokesman Dean Leavenworth.
Limited options
Currently, Time Warner subscribers in Los Angeles have access to 2,500 hours of on-demand programming per month on 43 of its channels, including local news on KNBC Channel 4. However, only 200 hours of it can be accessed without additional charges. Those include certain programs on CNN, the Home and Garden Network and other cable channels.
Meanwhile, Adelphia subscribers have access to only 1,700 hours of programming on 16 channels, such as Oxygen, Fuse, Discovery Channel and TLC. However, more of it 500 hours is free. And both cable companies are rolling out movies on demand as quickly as the studios allow them. Adelphia and Time Warner subscribers can call up a variety of new releases and a smaller number of classic movies for prices roughly equal to video or DVD rentals, roughly $4 to $5 each.
In addition, Time Warner pioneered digital video recorder functionality in on-demand programming, allowing viewers to fast-forward, rewind, pause and stop while watching programs they select. Locally, Time Warner also offers news from KNBC TV (Channel 4) for viewers to call up at will.
Erica Stull, an Adelphia spokeswoman, said the company is committed to on-demand programming but has had to spend two years upgrading its network from analog to digital lines.
“We’ve made a commitment, company-wide, to continue introducing video on demand, high-definition television and other features as long as we operate the system,” she said. “That’s going to continue.”
Indeed, while Adelphia’s offering are more limited than Time Warner’s, viewers in Los Angeles are better off than a large part of the country where no such programming exists at all.
Todd Chanko, a cable analyst for Jupiter Research in New York, said only 16 percent of U.S. cable customers have watched free on-demand programming while just 3 percent have paid a monthly subscription fee for the service.
Part of the problem, Chanko and other analysts said, is that cable companies are still searching for ways to profit from on-demand programming, attempting to determine what content should be offered for free and what should be charged.
Hollywood challenge
Still, they want to keep customers tempted by EchoStar Communications Corp., DirecTV Group Inc. and other satellite providers that offer competitive programming but not the interactivity of digital cable.
“It’s something the cable industry has all to itself right now,” said Jimmy Schaeffler, chairman of the Carmel Group, a media consultancy. “It has huge potential but it’s like anything else they’re learning to crawl before they can walk.”
Yet, one of the biggest obstacles to on-demand programming comes from outside the industry Hollywood.
A big key to an expansion of future offering will be convincing studio executives that a wide selection of on-demand movies will not cut into DVD sales or rentals. Studies have shown that every third or fourth on-demand viewing represents one lost DVD sale.
Another big concern is piracy. To date, there is no agreed-upon copyright protection standard.
Many studio representatives were reluctant to discuss the concerns publicly, saying they didn’t want to encourage piracy by acknowledging the ease of illegally duplicating on-demand movies. Kevin Mayer, vice president in charge of the Los Angeles office of L.E.K. Consulting, said the ease of viewing on-demand programs could encourage would-be pirates.
“A large piece of the piracy bucket is really attributable to that kind of behavior,” he said.
