Trials & Defibrillations: Interactive TV in the U.S.
Last week, MediaPost was kind enough to publish my first book, "Trials & Defibrillations: Interactive TV in the U.S." It is a compendiasaurus, a term that my wife coined, of historical and present day adventures (deployment and advertising) in the burgeoning iTV realm primarily focusing on the four major sectors: Video on Demand, Addressability, Interactive Program Guides and Digital Video Recorders. The following pages contain excerpts and set-ups from each. For more information about the publication please visit http://www.mediapost.com/researchreports/index.cfm?rr_aid=5 Thanks.
Video On Demand
Presently, video on demand can be divided into three iterations: 1) pay per play video on demand (VOD) where viewers choose content, typically movies, and pay a fee for access to the content for a 24-hour period with VCR functionality; 2) subscription video on demand (SVOD) in which subscribers pay an incremental monthly fee or receive this service for free as an additive to their digital subscription, to have unlimited access to programs offered on premium services, such as HBO or Showtime, for a given month, including VCR functionality; and 3) ad supported video on demand (AdVOD), which is offered for free to subscribers of digital cable and comes in three flavors: repurposed and independent VOD, comprised of programming that has already aired on the broadcast and cable networks or has been telecast in other countries but not in the U.S.; long form/ advertorial, defined as original programming provided by advertisers; and free video on demand, generally content created or licensed by the cable operator and presented as a dedicated channel within their VOD menu. Presently, there are upwards of 30 million digital cable households - nearly half of all cable households (65 million) - that have access to some form of video on demand programming.
In addition to insights regarding the propositions of many technologies and operator deployments, the publication identifies which networks offer ad-supported content on demand, what metrics are available to advertisers to evaluate the opportunity and the five commercial models that have been deployed. Additionally, it compares and contrasts the user experience as seen by subscribers of Cablevision, Charter, Comcast, Cox and Time Warner video on demand platforms.
The following is my list of the major impediments to advertiser engagement of video on demand and interactive TV applications:
Nearly half of the 65 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 - 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, video on demand 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.
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 that advertisers have not engaged more warmly to 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 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 in the form of preventing them from gleaning new subscribers, safeguarding the allegiance of old subscribers and encouraging advertisers to support their new media advertising propositions.
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.
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 their remote control and read through the finely printed content offerings.
Ad Agency VOD Adoption
Given the current silo-ed set up 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 we 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 often times 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.
In my opinion, the most successful VOD offerings in the ad supported realm from the viewpoint of advertising support and audience engagement has 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 than 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 be 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.
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 7 - 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 click stream data and the utilization of content manipulation applications. Furthermore, if the cable operators were able to secure permission from gov't regulators to study viewership behavior and marry it to datamining companies, such as Acxiom and Experian, than the televisual medium would be on equal accountable footing as the online community. A thought.
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
Often times 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, can not 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 learnings' promises when the operator's only provide the toys but not the intellectual and pragmatic direction. Again we 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.
The Interactive Program Guide
Through the interactive program guide or IPG, cable and satellite operators have created a new gateway to the wide breadth of TV programs, networks, content features promised by the advent of digital television. IPGs, or electronic program guides (EPGs) as they are sometimes referred to, have better coverage in the United States than any other interactive television application, reaching over 75% of the U.S. households through pay television platforms and services embedded in standalone TiVo style devices and new televisions.
The publication reviews the interactive program guide landscape and its impact on advertisers, vivisecting deployment, navigation and advertising opportunities. Additionally, as a nod toward the future, the ad-supported mosaic concept recently deployed by Time Warner and EchoStar as well as the futuristic Loop remote and navigation system from Hillcrest Labs are also analyzed.
Prior to Google's arrival on the scene and the initiation of its prime directive to make all forms of content searchable, video search would have fallen solely within the domain of the television's Interactive Program Guide. However, the online mandarins (Google, Yahoo, MSN and AOL) as well as many broadband video destination sites and services - such as Joost, Veoh, Blinkx, Clip Blast, Channels.com, Flurl, and TruVeo, to a name a few - have joined Google in its endeavor to create the consummate video search application, and for this quest have received an awful lot of press.
A precaution. In our opinion, online search is based upon research, not search. When people enter in a search word, or phrase, they know the topic and the essence of what they're searching for. It is quite specific. Unfortunately, it is not the same in the entertainment (video) realm. Wishing to find a comedy is different than searching articles about Henry Yuen's ouster from Gemstar-TV Guide. How often have we been in the situation when we ask wives, husbands, boyfriends, girlfriends, partners and/or friends about the evening's video entertainment and receive vague, genre responses in reply: "I feel like a comedy or a drama". No hint of actor, storyline, writer, year, director, title, or plotline. And so begins the evening's charade. True search - as we hopefully begin to zero in on the possibilities, preferences, availabilities and ultimately, the acceptable choice. Fingers always crossed.
In our opinion, video search will not succeed based upon the current keyboard and algorithms presently utilized in text search. Of course, if the searcher knows the title, actor, director, possibly even the plotline, the chance of success is enhanced dramatically. However, since video preferences are generally culled from the supplicant's directional "I feel like watching..." the search is an emotional one where we depend on "people curation" and browsing. Ultimately, video search engines will evolve collaborative affiliation engines to help garner a better understanding of the searcher's past preferences i.e., linear TV, on demand through pay-TV, broadband and wireless engagements as well as home video rental/purchases, to enable the engine to better translate the viewer's desire into a satisfying choice. As the collaborative affiliation process is perfected, it will present the advertising community with an opportunity to, where applicable, target messaging by geography as well as dynamically inserting advertisements that are relevant. Still, in our opinion, the domain of television's Interactive Program Guide - one that the cablers, satcasters and telcos should fight for.
The Digital Video Recorder
The digital video recorder (DVR) has been deployed as a standalone broadband connected device and has been included in cable, digital satellite and telco set top boxes. The DVR allows the consumer to record television programming via a remote control and navigate through an electronic program guide. Presently there are between 12 million to 19 million digital pay TV households that have DVR functionality.
The book evaluates the DVR environment as deployed by the cable operators Cablevision, Cox, Time Warner as well as satellite platform DirecTV, Verizon's FiOS and TiVo. Subscriber behavior as it relates to commercial avoidance is analyzed and the effect on media buying decisions evaluated. The publication also details advertising propositions and issues a warning on the effect DVRs will have on television viewing in the future:
Prior to the introduction of DVRs researchers alleged that 45% of commercials were not viewed in TV households - both analog and digital. Studies indicate that DVR households skip upwards of 80% of commercials. However, we do not believe that DVRs will have significant impact on commercial viewing in the aggregate and do strongly believe that the next iteration of DVR advertising propositions will meaningfully add to the marketer's arsenal of applications to connect to its potential customer for the following reasons:
¨ DVR users tend to view their favorite recorded programs within a day or three of recording.
¨ Real time viewing is still prevalent in those households that are not light TV viewers - which are the majority of U.S. households.
¨ Even in DVR households people like to watch commercials and/or forget to fast forward at different intervals of program viewing.
¨ At TiVo's fastest speed, when users fast forward through commercials they are paying more attention to the ad content than ever before because they do not want to fast forward through program content and have to rewind following the commercial break. Secondly, as long as all DVR deployers maintain a fast forwarding speed limit that enables people to view enough frames of the commercial to determine relevance, commercials will still be viewed. Studies indicate that viewers often rewind commercial content when there is a connection to the messaging.
¨ The thirty second commercial is not dead. It is evolving into a video portal where viewers can access more information and interact with the commercial content: telescoping to a microsite - a website housed in the set top box; telescoping directly to long form video content; requesting interaction (brochures, coupons, marketing surveys, sales contact); and eventually bookmarking (storing on set top box for later viewing).
¨ Over the next few years there will be deployment of two new forms of on demand advertising applications in which the DVR will play a pivotal role: dynamic ad insertion, in which the systems operator will be able to feed new commercials - referred to by Fox Broadcast Network as "time-dependent replacement commercials" - within the programs that are stored in the DVR platform regardless of length of time housed; and there will be geo-targeting of commercial messages as well as addressability to individual TV households through technological deployments by companies, such as Invidi, Navic, Visible World, and OpenTV. Also, given the daily pronouncements by companies deploying out of home DVR programming capabilities - mobile and remote - there will be more opportunities for advertisers to associate with this customer service and reach consumers across multiple platforms.
¨ Home networking of DVR boxes and entertainment services (movies, TV programs, music, photographs) through one centralized location within the house will become more prevalent, which will enable advertisers to market to individuals within the TV household via TV personally identifiable numbers (PINs).
¨ System operators will not deploy DVR devices that will eradicate commercials through video skips and extreme fast forward options and jeopardize losing the advertiser revenue streams.
Addressable Television Advertising
Addressable interactive television applications coupled with dynamic ad insertion promise advertisers the ability to match up and seamlessly direct advertiser commercial messages to specific households. Additionally, some of the technologies allow advertisers to target specific demographics or viewing behavior patterns within the pay TV operator's footprint. These addressable technologies are or should soon be available in cable, satellite, telco (IPTV) and possibly digital terrestrial markets (the latter will not be in place before digital conversion in February 2009). Presently, addressable technology deployments in the U.S. are estimated to be 70 million households. The publication details deployment by market and evaluates a wide range of products including Navic's interactive messaging application, Invidi's behavior-based targeted advertising, OpenTV's targeted advertising application based on demographic clusters and Visible World's AdTag/AdCopy advertising overlay product.
A few decades ago a prominent British advertising executive proclaimed he knew that 50% of his advertising was effective - he just wasn't sure which 50% that was. Interactive TV addressable technology holds the promise of helping to solve this riddle. At this time, since there has been minimal deployment of addressable television technology and analysis of its in market attributes, we can only speculate on its efficacy. However, based upon our scrutiny and experience in the TV interactive realm, we hope that the technology companies and pay TV operators address what we have delineated throughout this commentary to be the impediments to its success and adoption by the media and advertising communities.
In summary: at all costs protect the consumer's privacy; develop promotional campaigns to encourage the consumer's participation; deploy trials that generate cogent evidence to suggest more insight can be gleaned from a testing scenario other than technical competency; cross-pollinate relevant learnings from the online realm with future addressable TV campaigns; and lastly, engage the media community into collaborative alliances (advertisers, technologists, distributors, researchers and content providers) in order to help nurture what appears to be a valuable technology that could eventually give us clues as to which 50% of the advertiser's messaging delivery was effective.
In closing, despite the "sky is falling" attitude that many media people espouse I firmly believe that ad supported TV will continue to grow and the 30 second commercial will morph into a portal to engage the TV viewer and as Mr. Oscar has persuasively expressed in Trials & Defibrillations:
Most articles written about the television business, if not all, prognosticate about the demise of the 30 second commercial: viewers hate TV commercials; given the opportunity and/or technology all viewers would fast forward through commercials; viewers use going to the bathroom and seeking out food during commercial breaks as a desperate excuse to legitimize their avoidance of TV commercials; commercials are too long; and generally, as reported by industry pundits, the creative isn't very engaging. We've been listening to this looping litany since advertisers were first invited by TV stations, in the second half of the 20th century, to incorporate their products or messaging into live TV programs.
We think that with the evolution and deployment of digital technology, the TV commercial value proposition is going to evolve from a necessary evil - the foundation of free TV though that becomes more debatable in the on demand realm - and blossom into a gateway or portal to engage TV viewers:
In the future, and even in some markets today, TV viewers will have the opportunity, through manipulation of the TV remote, as program content takes a break and commercial messaging begins, to:
An application that allows a viewer to link from the TV commercial to more video content and/or text and graphics.
Request for Interaction
A direct response mechanism that allows a viewer to request additional information, whether couponing, brochures, or to be contacted by a salesperson.
A web-like site accessed through the set top box that can offer a combination of long form video, request for interaction, additional text and graphics.
The ability to access long form content on demand.
Similar to the "bookmarking" feature on computers allows a viewer to have easy access to "favorites" or other video in a playlist format. Note: this application has not yet been deployed.
In closing, we'd like to reiterate that at this juncture there are many variations of interactive TV technology and applications to test for future learning that will be applicable as greater deployment occurs in the multichannel universe. Interactive TV categories that have been vivisected in this analysis, such as digital video recorders (DVR), video on demand (VOD), microsites, request for interaction (RFI), addressability, dynamic ad serving, interactive program guides (IPG) or interactive media guides (IMG) and telescoping, will provide valuable learning, and (when deployed en masse) value propositions for both the advertiser and the consumer, and therefore, demand the media community's attention and scrutiny. And even if the most recognized brand names of today disappear, we are confident that many of the categories will survive, evolve and morph into new exciting applications to enhance the TV viewer's and advertiser's level of communication.