June 15, 2007
An Interview with Bruce Leichtman: Part IV of IV

The following is the final part in a series of four posts featuring a phone interview I recently conducted with Bruce Leichtman, who is the head of New Hampshire-based Leichtman Research Group. Leichtman is a respected quantitative survey-based researcher who focuses on both consumer analysis and industry data and perspectives.

The first three parts of the interview focused on Leichtman's background, his company's focus, and his work on high-definition television and online video. This final installment looks at his work on video-on-demand and his ongoing research.

For a previous mention of Leichtman's work on VOD, look here.

Sam: In a story on VOD from TelevisionWeek back in April, you were quoted pointing out the differences between 1.9 billion VOD sessions from Comcast and 51.3 million downloads from iTunes, yet iTunes gets much more attention in the press and the blogosphere. What do you think leads to this bias?

Bruce: There's the reality of what is actually happening, and then there is the hype about it, or what is being written. I think a great example of the disconnect that is out there was in the early days of the DVR and high-definition. Then, everything that was written about the DVR was positive, and everything that was written about high-definitioin was negative. Why was that? The writers for these publications had a DVR but could not afford an HD television at the time, so they didn't know people who had an HD television. Since they didn't know anyone who had one, they thought it was a failure, and they got caught up in their own circle without thinking of who else is out there.

A lot of people who write technologies like VOD off as passe aren't looking at what is really out there. Let's look at the reality of it; I always try to come back to what the reality is. The most important thing is not about me or you but about the masses.

One of the nice things about living here in New Hampshire is that life is a little more "normal." In New York or L.A., people are in a cocoon, and they think that everyone else is like them, but they are not. You often hear executives talking about themselves or their families as examples, but they don't realize how out of the mainstream they are. People just don't get that. Whether you are the president of a company or the reporter at a paper, everyone thinks they are mainstream, but no one IS the mainstream. That's why you do research.

Sam: What do you think is the future of VOD as compared to online video?

Bruce: This is obviously a media market that continues to evolve. Comcast had something like 1.8 billion sessions last year, averaging 25 minutes per session, for VOD. These aren't just people watching a second of something on-demand and then moving on. Now, Time-Warner is on track for a billion sessions themselves. It is one thing that should not be poo-pooed.

There is a killer-app of on-demand which is not talked about as often, and that's premium on-demand. Those services, tied to HBO and Cinemax and Starz and so on, are the stickiest part of on-demand service and the most valued. Those premium VOD channels have really transformed that product category.

Sam: What are some upcoming areas that you are looking at in your ongoing research?

Bruce: We have an annual on-demand study that will be looking at VOD and DVRs. In any study, we are always trying to refresh some portion of our content because they are tracking studies. We've been doing this one for six years, and we are always tweaking them to keep tracking how consumers are evolving. Then, we will be doing our HD study and will continue to see how that market is evolving. Then, we will be looking at emerging video services to understand how the use and desire for iPod video, cell phones, and broadband video is evolving. We'll also have a study on traditional multichannel TV. We do dedicated surveys on each of these topics. If you try and throw them all into one survey, you can't really get into these phenomena. We try to really get at how these markets are evolving.

Sam: What are your thoughts on the newest impending digital deadline for U.S. consumers to get a digital TV set or a converter?

Bruce: Government and consumer adoption are just two things that don't really mix. The government deadlines that are being set have no link with consumer practices. The deadline was originally December 2006, and that didn't happen. They probably won't be ready for it in February 2009, either. The market is evolving, but how it affects the adoption of these technologies has yet to be seen. Of course, the conversion is good for the consumer electronics industry, but I doubt we'll be ready for that switch at the beginning of 2009.

Sam: Any parting thoughts?

Bruce: Evolution is not revolution. People want things to change overnight, but they don't. Markets evolve. We might look back in five years and say, "That's amazing!," but people expect change to happen in a month, and it generally doesn't happen that way.

It's also about segmentation. It's not about everybody. When we talk about higher-end services, for instance, income is very important. We have to think on those levels and keep in mind that change that is evolutionary like this doesn't necessarily affect the masses overnight.

Today, 81 percent of households have a PC at home, and close to three quarters are now online at home. If you look back, that's amazing, but it didn't happen overnight. If you get into niche areas like iPod video, you really have to think about how that market will evolve or even if it will evolve. What does Apple TV bring to the table? Too often, people don't think about these questions. What is the unique selling point of this product?

People get all tied up in the "gee whiz" of it, but what they have to consider is what separates this product and what will drive people to shell out "X" amount of dollars.