Commentary

On-Demand Looks for Models

After an initial flurry of high-profile deals, the new world of on-demand programming platforms and content is set to move to the next evolutionary stage: consolidation and tinkering. Analysts say we can expect fewer blockbuster deals and a few shakeouts, as well as a lot of experimentation with consumer pricing and business models.

"Advertisers are eager to see the new business models," says Alan L. Shulman, chief creative officer of Brand New World, a marketing agency working with advertisers to craft messaging for the on-demand world. Shulman hopes he has one of those models: He plans to sell sponsorship of video downloads. "For a half-hour show -- 22 minutes without commercials -- it takes an average of two and a half minutes to download through an average high-speed connection," he says. This download time is an opportunity for advertisers.

Whether these new advertising elements succeed will depend, in part, on the most viral and effective of the on-demand platforms: Apple's iTunes Music Store. Shulman says that when Apple figures out its advertising component, it will be a game-changer.

Some deals are already structured around advertising, like AOL's partnership with Warner Bros.' TV library and Comcast Corp.'s on-demand agreement with CBS. What remains to be seen is how many ads will run and at what length.

Media agencies are desperately seeking creative advertising components for on-demand programming deals. "The ad community has been asking and asking for this," says Laura Caraccioli-Davis, senior vice president and director of Starcom Entertainment. "It's taking way too long. The fact is, none of them really have an advertising model."

In the realm of branded entertainment, Caraccioli-Davis has a reply for advertisers who complain about not getting an ample return on investment: "You have to make an investment before you get a return." She says most branded entertainment is about leveraging a marketer's media dollars, not about the value of the content.

Other industry observers believe new, on-demand content deals mean the rubber will finally hit the road and the road will hit back. "We'll go through a shake-out period," says Stewart Wolpin, senior consulting analyst for Points North Group.

Wolpin predicts that successful video content won't look like traditional TV. "The first TV programs were filmed radio shows," says Wolpin. "Producers are finding that online audiences are more niche, more diffuse. Not all of them understand the audiences."

TV producers Mark Burnett and Ashton Kutcher have forged content deals with Yahoo, AOL, and Google. But can they attract an audience and make money, especially given typically astronomical production budgets? "They are going to draw a microscopic percent of the audience that they would get on TV," observes Wolpin. "There will be a huge expense in getting viewership."

Broadcast networks have always had an advantage in promoting new shows using their airwaves. Even if an Internet series spends money for offline marketing, there will be creative concerns. "There is a disconnect," says Wolpin. "It takes work for the consumer. There are roadblocks. You have to remember the Web address. Then they have to question, 'Do I have the right media player?' All this is before they decide they like the content."

The good news is that the highest-profile platform in the on-demand alternative space is also the easiest: iTunes. "iTunes is the closest thing to network TV," notes Wolpin. "It's a seamless connection."

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