It's difficult to get too excited about Time Warner's (NYSE: TWX ) announcement on Monday that its Warner Bros. film unit will release some movies to video-on-demand (VOD) at the time they come out in DVD form. The approach apparently will be something of a test of whether such a simultaneous distribution can occur without doing serious damage to DVD sales.
My ho-hum reaction to the news relates largely to what, it seems to me, is the largely unfulfilled promise of VOD. Indeed, Warner's announcement could easily have been made five, or even eight, years ago, so little meaningful progress has been made on the video-on-demand front in the intervening years.
But here's where I come out on all this: First, I believe that VOD is a potentially terrific functionality, one that can meaningfully differentiate cable operators like Comcast (NYSE: CMCSA ) and Time Warner Cable (NYSE: TWC ) from satellite operators DirecTV (NYSE: DTV ) and EchoStar (Nasdaq: DISH ) . That's because satellite video can't, for technical reasons, offer consumers choices of thousands of hours of available films and other on-demand programming that cable can.
But neither can satellite compete head-to-head with cable's triple-play offerings of video, telephony, and high-speed data. As a result, especially during the past couple of years, the cable companies have been able to ride the triple play to achieve market supremacy over the satellite providers. In the process, they've only tinkered with VOD and, in most places, haven't turned it into a meaningful and sticky functionality for the consumer.
Interestingly, Chase Carey, DirecTV's CEO, made the point not long ago while speaking at an investor conference that his cable competitors haven't rendered in VOD an effective viewing opportunity. To do so (my assessment, not his) will require the MSOs (multisystem operators) to demonstrate marketing sophistication and even educational prowess -- areas in which they haven't had to become world class.
As to Warner's apparent efforts to feed VOD without starving DVD sales or undernourishing the Blockbusters (NYSE: BBI ) of this world, it seems to me that there are too many masters being served here. Why not cease the micromanaging and let the market determine how consumers wish to access films and other forms of video programming?
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions or comments. The Motley Fool does have a disclosure policy.
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