Video-on-Demand to Debut in L.A.

After years of promises from the cable industry, video-on-demand may finally become a reality--starting in Los Angeles.

Charter Communications Inc., the nation’s fifth-ranked cable operator, said Thursday that it will roll out the service here within the next three months in the largest launch ever of video-on-demand in the country.

The company, owned by computer billionaire Paul Allen, said 1.2 million homes in Pasadena, Alhambra, Monterey Park, Glendale, Burbank and Long Beach will have access to the service. More than 425,000 of those homes currently buy cable television from Charter.

Unlike pay-per-view, which allows viewers to watch movies at staggered start times throughout the day, video-on-demand gives instant gratification: programming at any time any day, with VCR functionality.

Though video-on-demand has been feasible for years, only recently has it become economically practical. Digital technologies and declining prices for servers that store movie libraries at local cable hubs have driven down the costs.

Charter customers must subscribe to a digital service--about $10 a month more than conventional analog service--to get VOD, which is included in the package, along with a digital set-top box and expanded channel offerings.

“Video-on-demand is the first of a wave of interactive services that we’ll see from cable as a result of digital boxes,” said Leslie Ellis, an analyst at Paul Kagan Associates.

For instance, she said, AT&T; Corp., soon to be the nation’s largest cable operator, is working on screens on the TV that will allow for e-mailing, home banking and chat.

Analysts say video-on-demand will help cable distinguish itself from satellite TV in the battle for customers.

“For most cable operators, this will be a loss leader--not a way to make money but a way not to lose customers,” said Tom Eagan, an analyst at PaineWebber Inc. Eagan added that Charter is among the most vulnerable operators to satellite because many of its systems are antiquated, with few channels.

Los Angeles is one of the company’s showcase markets. “We chose L.A. because we were looking for a market where it would have the greatest appreciation,” said Stephen Silva, Charter senior vice president of corporate development and technology.

Charter will begin offering hit movies after the video rental run of the title--at the same time that films now appear in pay-per-view on cable. “Customers will just have more control and choice with VOD,” said Patty McCaskill, vice president of programming and pay-per-view at Charter.

Analysts say the cable industry wants the studios to give them first crack at the movies--simultaneous with the airlines and hotels and before video stores. Prospects are slim because of the limited number of digital set-top boxes in use, a total of only 5 million.

Movie studios have been skittish about committing libraries to video-on-demand for fear of cutting into the $8 billion a year they make from video rentals and because of uncertainties over the future of downloading movies from the Internet, which would make video-on-demand moot.