• by Mitch Oscar , Op-Ed Contributor, July 31, 2007

I was having a discussion about ad-supported video-on-demand with a group of interactive television enthusiasts last week. We all agreed to come up with a list of what we thought were the key reasons or impediments to advertiser engagement of video on demand and interactive TV applications in general. The creator of the least insightful list would have to foot the bill when next we lunched. I figured, though admittedly unfairly, that I would use my perch on TV Board, to ask those of you who read my stuff to please share your thoughts so that my list will be more robust and therefore someone, other than me, would have to subsidize the gathering.

The following is my list of the major impediments to advertiser engagement of video on demand and interactive TV applications:

Penetration (scale). Nearly half of the 64 million analog cable households are digital cable subscribers. Upwards of 80+% of those households have the ability to access long form/advertorial and cable systems operator-supplied content, and less than 70% of digital cable customers have the ability to access ad supported cable network VOD content. In other words, 20 million to 23 million digital households have the ability to access VOD. When one considers that advertisers demand 90+% penetration for broadcast networks, 75+% clearance for syndication and 70 million homes, on average, for cable networks to be considered part of the buying mix, VOD scale pales by comparison. Also, advertisers are not sure which markets receive the VOD content: rarely are they continuous or match regional patterns. Instead, the market deployments are haphazardly strung together on the whim of the operators, based upon their arcane criteria for deployment.

Usage. Presently, the cable operators utilize research firm Rentrak to measure monthly VOD usage. The metrics are basic: unique monthly viewers, gross monthly viewers, duration of time spent viewing – though not by segment, such as commercial versus program content, but rather in totality, and, upon request, will supply graphs of day and daypart viewing. There is no demographic information. Although Rentrak claims that they can provide much more meaningful data, the cable operators have, we are told, restricted their analysis to “the basics.” When advertisers contemplate utilizing interactive media applications, they compare output to the online realm where usage is “transparent.” Metric limitation is one of the many reasons advertisers have not engaged more warmly with ad-supported and long form/advertorial VOD propositions.

Familiarity or Lack Thereof. I am always amazed at how unfamiliar ad agency personnel and advertisers are about video on demand – not only as it pertains to advertising applications but as consumers. Whenever I canvas a room during presentations about interactive TV, I discover that many of those in attendance are cable subscribers whose platform does include VOD. However, for whatever reason, these people are not compelled to vet out the proposition or even be aware of the VOD offering. Overall, I think that cable operators have done a poor job in explaining new media applications and services to their customers, which ultimately haunts them by preventing them from gleaning new subscribers, safeguarding the allegiance of old subscribers and encouraging advertisers to support their new media advertising propositions.

Commercial Integration. When advertisers purchase an ad-supported cable network VOD schedule, they must integrate their commercials 30 days prior to the beginning of the month in which their campaign commences. Too long and prohibitive if an advertiser wishes to modify their commercial schedule in response to: consumer demand for the product or lack thereof, new commercial messaging and/or competitive marketplace demands. Eventually, when cable operators deploy dynamic insertion technology -- the ability to insert new commercials over existing ones on the fly -- this problem will cease to exist.

Navigation. Unfortunately, the cable operators have made finding VOD content on their systems very difficult for their customers. On average, subscribers must navigate through a minimum of four VOD content areas before they can begin to zero in on the content that satiates their viewing needs. Too many screens and too frustrating for a consumer as they try to manipulate the remote control and read through the finely printed content offerings.

Ad Agency VOD Adoption. Given the current siloed setup of the advertising agencies – traditional media and online media – it is difficult for VOD purveyors to find out who in the agency has the expertise to analyze their offering and has the budget to purchase it – not necessarily the same person or department. There is no easy remedy for this situation, which will only be rectified when, as I have previously mentioned in other pieces, the agencies move away from horizontal media silos to vertical integration i.e., video, audio and data. Unfortunately, in the painful interim, the cable operators have added to the confusion. Presently, the cablers have three independent sales forces hawking the same content: local cable sales teams, national cable sales teams and NCC, an organization owned by the major cable operators that represents local ad avails and interactive TV applications to the ad agencies and their clients. In my experience, there is lots of dis-information flowing, and oftentimes the coordination of these competing entities is a full time job unto itself.

Another impediment is billing – particularly when a national advertiser is involved. Present day audience delivery/post analysis and billing systems, such as Donovan, are not geared up to integrate national buys on local levels. Therefore, it is always a logistical challenge when cable networks and operators consummate national advertising deals only to find out later that the bills haven’t been paid. A resolution always involves lots of phone calls and coordination.

Content Creation. In my opinion, the most successful VOD offerings in the ad-supported realm from the viewpoint of advertising support and audience engagement have been the cable network offerings. Viewers and advertisers are familiar with the content. And, in most probability, if the advertiser has already purchased linear, cable network schedules then they will feel confident in supporting their digital extensions. The problem with long form/advertorial VOD is that rarely does the advertiser have this type of content, or is willing to invest in its creation for a platform that has limited scale. Lastly, in the last couple of years the cable operators have been developing their own VOD channels covering the major food groups, such as health, sports, and lifestyle. When queried about the content, they reassure the ad community that they will only license, aggregate and create, if necessary, the very best. A word of caution: 90+% of the new season broadcast and cable network shows fail. They too have employed the very best. It is one thing to build a channel, another to garner visitations – the currency of ad support.

Measurement. No one knows how people watch TV anymore. It used to be so simple, the media community thought: there was a gaggle of broadcast channels in the market – upwards of seven – and someone in the household would turn on the set and tweak the channel selector to arrive at the desired channel. Given the myriad of choices and content manipulation technologies – such as DVR, VOD, RFI, interactive media guides, telescoping, microsites – advertisers and their agencies no longer feel secure in their knowledge of how people engage with television as well as their commercial messages.

The cable operators have an opportunity to help the ad community understand the new relationships between content and viewers, and in the process gain the appreciation from the ad guys, which would probably result in greater ad spend. The cablers could utilize the services of research firms TNS and Rentrak to begin to understand the relationships between choice, convenience and control through clickstream data and the utilization of content manipulation applications. Furthermore, if the cable operators were able to secure permission from government regulators to study viewership behavior and marry it to datamining companies, such as Acxiom and Experian, then the televisual medium would be on equal accountable footing as the online community. A thought.

Pricing. There are no set pricing models in the VOD and interactive TV realm:

Ad Supported VOD (Cable Networks). Cable network ad supported VOD platform negotiations are probably the simplest: cost per thousands (CPMs) of between $25 and $40 dollars that mirror broadband video pricing.

Ad Supported VOD (Cable Operators). Similar to cable network VOD platform negotiations.

Long Form/Advertorial VOD. Oftentimes sold in combination of bandwidth requirements – how long is the VOD content – and a local cable schedule to promote the fact that an advertiser’s content is housed in VOD offering. Prices vary from the cost of the bandwidth – once upon a time $45,000 for upwards of 30 minutes – to a local supporting advertising schedule that, depending on the market, could cost upwards of $200,000 for a month of activity.

Other Forms of iTV. Since very little information is shared about the results of various iTV campaigns and/or the utilization of the different interactive technologies, the cable operators have not developed meaningful pricing models. Yes they have rate, or rape, cards, but in reality, they are floundering when it comes to establishing realistic pricing guidelines. When VOD and primitive addressable ads were introduced at the turn of the century, the cablers demanded marketshare increases of 40% concurrently with CPM augmentation of 30%. When advertisers didn’t engage, CPM demands were removed from the table in favor of marketshare.

One of the industry’s biggest complaints is that system operators, whether cable or satellite, cannot provide guidance to advertisers on best practices for utilizing their interactive applications. In my opinion, neither platform has invested the perspiration in understanding how this iTV stuff works from an advertising engagement perspective. Instead they demand increases in marketshare and/or CPMs to cover their “infrastructure” costs and promise learnings. Unfortunately advertisers have been reluctant to engage in the learning promises when the operators only provide the toys but not the intellectual and pragmatic direction. Again, I recommend that cablers and satellite platforms retain entities, like TNS and Rentrak, that have research and technology understanding, to help provide the necessary information to assuage any anxiety that prevents advertisers from meaningfully dipping their toes in the iTV waters.

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