DIRECTV Plays Defense on Demand

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Satellite TV provider DIRECTV (Nasdaq: DTV) now boasts video on demand (VOD) services, the better to snare customers into profitable premium services with. It's a necessary move, though hardly revolutionary.

Digital cable TV subscribers with providers such as Comcast (Nasdaq: CMCSA) or Time Warner Cable (NYSE: TWC) have long been accustomed to a selection of mostly back-catalog and niche shows available with a few clicks of the remote. The fat two-way data pipe inherent in Verizon's (NYSE: VZ) FiOS service made VOD service a no-brainer there, and the satellite guys have been left without this desirable feature for too long.

DISH Network (Nasdaq: DISH) has rolled out a VOD offering already, although it's more like another pay-per-view option at the moment -- the content selection consists mainly of recent movie releases, viewable for a fee. DIRECTV will go a lot further. A company representative told me that the selection is comparable to what I'd find on a cable box, with "thousands" of free and for-pay programs from Spike, Lifetime, that ubiquitous Music Choice service -- you name it.

The kicker is that you need to have a very specific set of DIRECTV services and hardware installed in order to enjoy the on-demand package. It takes a recent high-def DVR box, connected to both your telephone landline and to a broadband Internet connection. Some of the content streams over the Net in battle-tested IPTV fashion, and the machine will suck down a few movies in its spare time, to be stored in a reserved portion of your DVR for instant viewing.

For customers who meet all the requirements, it's an instant and free service upgrade that gives them one less reason to leave DIRECTV for more modern alternatives. For the company, it's a selling point that could convince a few fence-sitters that direct is the way to go, and also an argument for trading in outdated (and possibly TiVo-powered (Nasdaq: TIVO)) hardware and low-grade services for a fresh box with high-margin monthly extras.

The service is still in beta status, and the sales staff isn't pushing it too hard. I see this as "keeping up with the Joneses" (and Seidenbergs, and Parsons) rather than true innovation. Don't buy DIRECTV just because they got VOD. On the other hand, you now have one fewer reason to sell, or not to buy at all.

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