One small step for Home Entertainment, one giant leap for the Entertainment Consumer
March 14, 2011

The recent Jan 2011 launch of Orange Switzerland’s hybrid physical/digital home entertainment service, CineHome, has added yet another Video On Demand (VoD) product to the already crowded Swiss digital TV market – There are now 8 VoD services, which is quite an impressive number for such a small country. Until recently, only Swisscom TV, Cablecom, Acetrax, and Microsoft’s Xbox’s Zune were available, but 2010 saw the launch of Apple TV, Swiss TV, and DVDFly’s new MovieBox. So what makes Orange’s new CineHome product unique in the Swiss market? In addition to the combined Disc (DVD & Blu-Ray) mail order and VoD offering, CineHome includes what in my opinion is the killer concept that will revolutionize the consumer entertainment industry: Unlimited VoD, for a monthly subscription. Also known as Subscription Video on Demand (SVoD), this simple concept promises superior value to the end consumer. It is essentially Pay TV programming (block buster movies and TV Series) without the programming schedule. Premium content is accessible at any time, on demand, directly on the TV set; imagine catching up on the entire last season of Two and a Half Men before the new season airs on Pay TV, and doing a six film Harry Potter “movie marathon” before hitting the Cinema to catch the 7th and latest release in the Series. Include regularly refreshed content and you get the killer concept that will quickly replace today’s Pay TV and pay-per-view driven home entertainment experience. In CineHome’s case, there is no additional fee for SVoD; content is included in the basic monthly subscription under the WarnerTV brand. But CineHome is not a pure SVoD service, which generally includes only Library titles: most of CineHome’s content is very recent and still accessible on a transactional pay-per-view basis. Orange decided to add WarnerTV’s 100 to 130 hours (at any one time) of weekly and monthly refreshed Hollywood studio content including movies, TV Series, and Animated Series, at no additional cost to the end consumer. But, CineHome is not Orange’s first unlimited subscription based on demand service. In May, 2010, they launched Switzerland’s first and only unlimited Gaming service offering PC based game play across over 450 titles, for a single monthly fee. And with other products under development, Orange may quickly become Switzerland’s premiere entertainment provider.

Although new to Switzerland, SVoD is already proving to be a massive success in the US market. Netflix, is an excellent example of how unlimited access to digital content is the future. Initially founded as a subscription based physical disc mail order rental service, Netflix has quickly (and successfully) realized the potential of unlimited content packages whilst adding the important convenience of direct to TV VoD streaming. By offering their clientele access to an impressive catalogue of block-buster movies, on demand, with no limit to the number of films they can view during any given subscription month, Netflix has single handedly revolutionized America’s Home Entertainment business. And this has captured the public’s attention, propelling Netflix into a market leadership position among traditional and digital home entertainment services. In fact, Netflix CEO Reed Hastings recently stated that his company is “now primarily a streaming company that also offers DVD-by-mail.” The below figure is a snap shot of the trend that Netflix experienced between its physical (Disc) and digital:

This rapid growth in SVoD consumption (see WI views, which in 2011 are expected surpass declining disc rentals) caused a major shift in the company’s focus, spurring Netflix to increase investment on its now more popular SVoD service, and announcing its intentions to decommission its physical rental business. However, Netflix is far from being the only provider of SVoD content in the US market. Services such as Comcast’s Xfinity include unlimited free views of content within its basic introductory subscription (as does Orange CineHome); however, by browsing the Xfinity free view service, one quickly understands the limited offer compared to both CineHome and Netflix. But like Orange CineHome, Netflix is an Over The Top (OTT) ISP agnostic product where the luxury of leveraging on triple play (and often quadruple play) traditional Telco services is not possible. Orange is the only mobile centric telecommunications operator in Switzerland and with no fixed broad-band assets, its VoD product must continue to lead in the content arena; otherwise, Orange will find it difficult to gain Swiss home entertainment market share.

Out of Switzerland’s 8 VoD services, and at the time this article was written, only two offer any SVoD content: Orange CineHome and DVD Fly; however, both are essentially one in the same. The CineHome product is based on DVD Fly’s platform but with Orange born enhancements – DVD Fly’s own product evolution has greatly benefited from the partnership with Orange. Common to many large telco / start-up relationships, Orange has brought not only an essential cash injection into DVD Fly’s business, but also rigorous product development discipline, product innovation (e.g., the introduction of SVoD), and attention to pre-launch consumer testing and approval. In fact, since the relationship with Orange was founded in early 2010, DVD Fly was able to increase its major Hollywood studio content catalogue, improve the user interface and performance of their portal, optimize their go-to-market proposition, and ultimately benefit from Orange’s SVoD content strategy.

The success of the SVoD concept has already proven itself in the US, so it is most likely only a matter of time before it also proves itself in similarly competitive markets such as Switzerland. And once consumers become accustom to the advantages of SVoD based content consumption, pay-per-view based consumer Entertainment as we know it today will never be the same.