ExpressVu applies for VOD licence to help proposed cable service be competitive

Bell ExpressVu LP has applied for a video-on-demand (VOD) licence primarily to ensure that its sister company Bell Canada’s proposed TV broadcast service is competitive with the incumbent cablecos. "They (the VOD and the Class 1 cable licence applications) are two independent applications. But once we obtain the cable licence, we intend to be out in the market with our wireline cable service as soon as we can thereafter," Bell Canada VP of regulatory affairs Mirko Bibic tells Canadian Communications Reports. "The objective here is to be as competitive as possible and to offer as much choice as we can. Video-on-demand is a nice feature to have to be competitive." Bibic says that while the VOD licensee will be ExpressVu, the intention is to provide the offering to the Bell cable licensee. Technological barriers are preventing direct-to-home (DTH) satellite TV distributor Bell ExpressVu from launching VOD in a traditional way. Cable operators advertise the feature as a cable-only value add, and all of the major cablecos offer the service. While Bibic notes that Bell ExpressVu continues to examine innovate ways to offer video-on-demand, such as routing movies through personal video recorders, the VOD licence application is "really to deliver the service to the Bell cable licensee." An application by Bell Canada for two Class 1 regional broadcast distribution licences was gazetted on June 8, the same day as ExpressVu’s VOD application (Broadcasting Notice of Public Hearing 2004-4). "ExpressVu has successfully operated a licensed pay-per-view (PPV) service since 1999, and therefore has the necessary programming and marketing expertise to run a competitive VOD operation," writes Bell ExpressVu government and regulatory affairs senior director Chris Frank to the CRTC. ExpressVu is seeking to run a national VOD service consisting mostly of movie titles "but depending upon market demand and content availability, it could include archival films or television programs" as well as children’s and educational programming, music services, and adult programming. It anticipates launching VOD operations as soon as the licence is granted, and hopefully by the third quarter of fiscal 2004. The assumption is that the first year of the licence term would end Aug. 31, 2005. ExpressVu has earmarked $5.5 million to get the VOD service off the ground, with all monies being provided internally from corporate resources. According to documents filed with the CRTC, ExpressVu anticipates generating $238,000 in revenues in year one of the licence and increasing that figure to $91.2 million by year seven. Total operating expenses, including programming and production, technical, sales and promotion, and administration, are expected to rise from about $1.3 million in year one to $80.4 million in year seven. ExpressVu doesn’t predict turning a profit from the service until year five, when it anticipates making $1.05 million. It expects to lose $1.26 million in year one, $1.67 million in year two, $1.52 million in year three, and $180,000 in year four. ExpressVu projects reaching 35,000 subscribers in year one, with the number jumping to 1.021 million in year seven. Bibic notes that the projections include only customers subscribing to Bell Canada’s planned wireline TV broadcast service. It is anticipated that the VOD content would be received at ExpressVu’s central head-end on pre-recorded media. It will then be encoded to create a file that will later stream to the subscriber at a bit rate appropriate to the access network bandwidth to the home. The encoding format will be MPEG-2, MPEG-4 or WM9, and the video streams will be encapsulated in standard Internet Protocol. The most frequently accessed content will be stored on local services in different geographic areas. ExpressVu tells the CRTC that it anticipates charging from $3 to $6 per title, depending upon the age of the movie. The broadcast distributor will retain 20% of the revenue, and 80% will flow to the VOD licensee. Of that 80%, 60% will accrue to the program supplier/distribution house and ExpressVu will retain 20%. Bell ExpressVu commits to paying 80% of 5% of the revenue derived from VOD to the Canadian Television Fund and the remaining 20% to the Bell Broadcast and New Media Fund. Contributions to the funds are expected to total $7,000 in year one and rise to $2.85 million by year seven. "Consumers seek more flexibility to enhance their enjoyment of television, and increasingly are seeking the opportunity to view feature films and other forms of programming at times convenient to them," concludes ExpressVu in its VOD licence application. "ExpressVu has a technology solution to satisfy that demand, and needs to offer a VOD service to compete with cable and neighbourhood video services."

ExpressVu applies for VOD licence to help proposed cable service be competitive

Broadcast | June 21, 2004

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