BELL ATLANTIC'S MARKET TRIAL SHOWS VIDEO-ON-DEMAND CAPABLE OF BECOMING KEY REVENUE GENERATOR WITH BUY RATES 12 TIMES THAT OF PAY-PER-VIEW
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FOR IMMEDIATE RELEASE
March 19, 1996
BELL ATLANTIC'S MARKET TRIAL SHOWS VIDEO-ON-DEMAND
CAPABLE OF BECOMING KEY REVENUE GENERATOR WITH
BUY RATES 12 TIMES THAT OF PAY-PER-VIEW
Stargazer(1) Earns Top Grades on Mid-Term
FAIRFAX, VA -- Results are in for the first six months of Bell
Atlantic Video Services' pioneering video-on-demand market
trial, showing buy rates of about 330 percent(2),
compared to the
pay-per-view industry average buy rate of 26 percent(3). This data
also suggests that video-on-demand has the potential to challenge
video tape rental as the top revenue generator for Hollywood studios.
"The combination of video server storage capacity -- or "shelf
-- and convenience in ordering has resulted in buy rates that are more
than twelve times that of the average pay-per-view system,"
Stuart Johnson, chairman of Bell Atlantic Video Services. "We've
found that our customers are substituting Stargazer for video tape
rental. This suggests that video-on-demand technology can challenge
video rental as a key revenue source for Hollywood," Johnson said.
"More importantly, I'm convinced we can significantly increase buy
rates once video-on-demand is packaged with the promotional
capabilities associated with linear TV and is blended with other
categories of programming, such as live events."
The 330 percent buy rate is just one of the significant findings of
Bell Atlantic's video-on-demand trial that the company will use as it
enters the video entertainment business later this year. Bell
Atlantic's initial offering will be a wireless digital TV service with
"We will use our insights into customer viewing patterns initially
help us organize programming delivered via wireless digital TV,"
Johnson. "But all signs to date show that when Bell Atlantic's full
service network is built, video-on-demand will be a key product
Bell Atlantic Video Services today released a "mid-term report
of trial results (see attached sidebar),
including data on programming
preferences, customer buy rates, installation and repair, customer
churn and pricing preferences.
"Our trial customers have told us that not only will they choose our
product over video rental, premium cable services and pay-per-view,"
said Frank Pereira, president of Bell Atlantic Video Services, "but
they are willing to pay competitive prices for it. Our delivery system
meets their needs and our customer service is rated excellent."
Since the end of August 1995, nearly 1,000 home owners in the Virginia
suburbs of Washington, D.C., have been able to order from a list of
more than 655 program choices each month, available whenever they
desire -- and with on-screen features such as pause, rewind and fast
forward that are controlled by using a hand held remote control
device. The first trial customer was installed in May 1995. This
report covers the period May-November 1995.
The customers were recruited through a direct mail campaign aimed at
more than 16,000 households that are located close enough to one of
several Bell Atlantic facilities equipped to deliver video signals
over telephone lines. The direct mail effort resulted in an 8 percent
positive response rate over the course of 10 days. The number of
trial customers was limited to 1,000 for legal reasons that govern use
of the Bell Atlantic telephone network for the market testing of the
transmission of video.
Bell Atlantic is using the trial to perfect processes for local
marketing, sales and service in the video entertainment and
information arena, as well as to gain insights into organizing,
maintaining inventory and managing the traffic involved in the
commercial presentation of thousands of video programs. The current
market trial builds on a successful technical trial of video-on-demand
capabilities with 300 households in Northern Virginia that ran from
April 1993 to March 1995.
The results of the market trial also are being used by TELE-TV as it
develops a commercial interactive TV service, slated for delivery by
Bell Atlantic Video Services and others to selected markets in 1997.
TELE-TV is the new media and technology venture that Bell Atlantic
formed last year with Pacific Telesis and NYNEX; it is providing
significant support for Bell Atlantic's video-on-demand trial.
The trial has generated a host of findings for Bell Atlantic and its
partners. Selected results of the trial include the following:
- Composite buy rates for all subscribers in the first six months
330 percent per month, compared to the pay-per-view industry average
buy rate of 26 percent.
- Stargazer households averaged 3.3 videos purchased per month,
compared to 3.2 videos rented per month by households with a VCR.
- Buy rates for the top Stargazer movie title (30 percent)
significantly exceeded the highest buy rates for the identical
movie title (6 percent) in a high-performing cable pay-per-view
- On average, 73 percent of all subscribers purchased some programming
- New release movies were the most popular content selection, followed
by children's programming and library movies.
- On average, more than 70 percent of all program titles were viewed
each month, reflecting customers' desire for an offering with both
breadth and depth. Usage by category also supports a diversified
- Market trial customers routinely requested even more content than
the more than 655 programs available for viewing each month during
the period of measurement. The program line-up included more than
200 full length movies. This suggests a tremendous appetite for
videos on demand.
- Customers want an even more dynamic experience in terms of
functionality -- especially in the area of home shopping -- than was
available with the service. This points to the need to deliver the
service using more advanced technology.
- According to research conducted by an independent firm, provision of
customer service has met or exceeded customer expectations 96
percent of the time (July - November, average ratings over eight
categories, including response time and degree of helpfulness).
- Bell Atlantic Video Services experienced less than 1 percent
controllable churn per month during the period measured.
From the first day of the trial, approximately 42,000 minutes of
programming have been available to customers, on demand, at any time
of the day. The product mix during an average month was comprised of
about 200 new, recent and classic movies; more than 120 episodes of
television sitcoms, dramas, talk shows and news specials; and 45
sports, comedy and music performances. The initial product mix also
included more than 170 special interest programs in areas such as
history and culture, sports and fitness, home and family, and personal
pursuits; and approximately 120 titles of children's programming,
ranging from popular cartoons to educational fare.
A first generation of interactive shopping -- Stargazer Marketplace --
was also tested during the first six months of the trial. Stargazer
Marketplace was phased out at the end of 1995. TELE-TV is now focusing
on development of the next generation of interactive shopping, which
will utilize more robust functionality than is currently available on
Stargazer. Many of the lessons learned from the Stargazer trial will be
incorporated into this development. Interactive shopping is slated to
return with TELE-TV-branded, commercial versions of interactive TV in
the next year or two.
On a technical level, Bell Atlantic's on-demand programming service
consists of data stored in computers that is forwarded to a TV screen
when a viewer calls it up -- as happens with the electronic computer
mail systems with which many are familiar.
By virtue of the data compression techniques that have been developed
and perfected by Bell Atlantic and TELE-TV Systems, it is now
economically feasible to store movies and TV programs as data on
computers and transmit them to a TV set when a viewer presses a button
on his or her remote control device.
"Bell Atlantic's market trial has afforded TELE-TV and it partners
opportunity to test and refine the systems and processes that must be
in place if a company is to deliver video-on-demand commercially,"
said Ed Grebow, president of TELE-TV Systems.
"We have confirmed through this trial that the cost for the
interactive technology needed to deliver video-on-demand to a mass
market is just pennies per customer, per video," said Grebow. He
that by "interactive technology," he was referring to the cost
servers, encoding, the production of navigational interfaces and
related processes, but not to the cost of transmission or the cost of
license fees for programs.
"In short, video-on-demand will add significant value when offered
conjunction with off-air and satellite TV services," said Grebow.
Bell Atlantic will first enter the video market in late 1996 using
wireless technology to deliver a TELE-TV-branded digital television
service. Then in 1997, on-demand services will be added to the
digital TV offering and delivered over the modernized
telecommunications network that the Bell Atlantic telephone companies
will be deploying in selected markets.
TELE-TV, based in New York, with offices in Los Angeles and San Ramon,
California, and Reston, Virginia, was created by Bell Atlantic, NYNEX
and Pacific Telesis to spearhead their entry into the video
entertainment market. TELE-TV Systems is the unit that will assemble
and integrate the technology needed to develop and deliver video
services. TELE-TV Media is the unit that will acquire, create and
Bell Atlantic Corporation (NYSE: BEL) is at the forefront of the new
communications, entertainment and information industry. In the
mid-Atlantic region, the company is the premier provider of local
telecommunications and advanced services. Globally, it is one of the
largest investors in the high-growth wireless communication
marketplace. Bell Atlantic also owns a substantial interest in
Telecom Corporation of New Zealand and is actively developing
high-growth national and international business opportunities in all
phases of the industry.
- (1) "Stargazer" is Bell Atlantic's
provisional brand name for the
service it has been testing. The commercial brand name for a
vastly new and improved interactive product will be developed by
(2) These buy rates are calculated by dividing the number of units
sold per month by the number of addressable households, then
multiplying by 100.
(3) As reported in The 1996 Pay-Per-View Report, published by Paul
Kagan Associates, Inc.
for more information, contact:
- Larry Plumb, (703) 708-4360
Ginger Fisk, (703) 708-4222
Sidebar: Results of VOD Market Trial
Sidebar: Description of Services and