Commentary

The Forging Of The Fellowship Of The Digital Rings Broadens

In early July 2009, Verizon contracted with Comcast, the largest cabler in the U.S. (24 million subscribers, dominant stakeholder of the pronouncement prone Canoe Ventures and majority partner in National Cable Communications (NCC), the nation's largest spot cable advertising firm and innovative electronic systems developer (order expression, billing, third party data integration) to utilize their local sales force to represent Verizon's FiOS video commercial inventory in markets where the two companies offer competing consumer television and broadband platforms - approximately 10 major markets.

Last February (2009), Comcast struck a deal with satcaster Dish (14 million homes) to represent its local advertising inventory on 10 regional sports networks that feed into seven top 10 U.S. markets.

A year ago (summer 2008), National Cable Communications, owned by the country's largest cable systems operators (Comcast, Time Warner, Cox, Charter) representing nearly 60+ million homes (40 million digital converts) - was retained by satcaster DirecTV (18 million) to take over national spot sales for regional sports networks carried on DTV in nine markets as well as melding those DTV carried networks into cable interconnects in said markets.

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January 2008, National Cable Communications was retained by telco Verizon to handle local inventory sales for its video service FiOS - presently serving 2.2 million subscribers with telephony hegemon AT&T and its video platform, U-verse, passing 1.3 million. As an aside, I've always thought that the telco's IPTV plans to enter the video service realm would be construed most dangerous to the local cable operator - another entity competing for their "fair share" of local market TV advertising budgets. Presently, local cable operators glean upwards of $4.5 billion of the $25 billion local TV ad expenditure even though TV viewers spend upwards of 56% of their time watching cable programming.

>Mortal enemies all -- just listen to the consumer acquisition campaigns -- uniting in common cause to sell more commercial television inventory in an incredibly difficult, recessionary, increasingly fragmented market. In my opinion, this alliance of pay TV operators -- now cable, telco and satellite -- through a single source sales representative, such as NCC, provides a mechanism for them collectively to build a greater presence in the market to challenge the dominant TV station broadcasters; and portends extending the fellowship as follows:

  • AT&T's video service U-verse, which does not compete in the same markets as rival telco Verizon, joins the association and benefits from its clout as well as infrastructure sales/support cost savings

  • AT&T's months-old break with EchoStar and alignment with DirecTV leads to the satcaster's acquisition by AT&T - a persistent rumor when the telco juggernaut partnered with EchoStar - and an eventual melding into the fellowship to benefit from its clout as well as infrastructure sales/support cost savings

  • satcaster EchoStar (14 million subscribers) and rival DirecTV (18 million subscribers) merge -- or align their sales organizations -- an additional persistent rumor, giving the satellite platforms more parity in terms of digital cable penetration and national reach; in a far fetched comedic scenario given the persistent DVR copyright litigation between TiVo and EchoStar with DirecTV quaking in the wings, TiVo hires Henry Yuen to represent its claim and both companies are awarded to TiVo for compensatory damages

  • in our present challenging financial environment Satcasters EchoStar and/or DirecTV seek financial assistance from outside financial entities and/or seek alignment for media commercial sales and trafficking operations

  • John Malone's Liberty, which owns 40% of DirecTV, pumps $530 million into digital radio satellite platform XM Sirius to stave off bankruptcy proceedings and EchoStar exited leaving DirecTV the possibility of utilizing some of XM Sirius channel capacity to beam ad supported video programming into motor vehicles. Note: I understand that upwards of 15 million cars in the U.S. have this capacity and it will be more rigorously incorporated into automotive infrastructure in the future.

    The Fellowship consisted of nine pay TV distribution members: four Hobbits (Comcast, Time Warner, Cox, and Charter and allies, whose retinue equaled 60+ million souls), two Men (EchoStar and DirecTV representing 32 million humans), one Elf (Verizon's FiOS 2.2 million spirits), one Dwarf (AT&T's U-verse - 1.3 million folks) and a wizard (to be determined, though technological in nature). In opposition stood Sauron and his minions including the Nazgul, Numenoreans, Uruk-Hai and Orcs - those representing the free TV broadcasting marketplace.

    In June, the One Ring was "mandatedly" converted from analog into digital spectrum and as a result the dominant free TV purveyors and their multichannel TV station transmissions (upwards of 4 per TV station) could be challenged for the first time by a digital pay TV Fellowship that is supported by upwards of 100 million households - only 10+% less than the broadcasters 114 million household reach. Possibly, altering ad revenue aggregation and TV viewing in favor of the Fellowship in years to come.

    The form in which wizardry will influence the impending conflict can only be surmised. To date, the Fellowship has already conjured up interactive advertising applications and measurement - though in limited deployment - that include advertising incantations (request for interaction, telescoping, long form, microsite), program soothsaying (TV Guide Interactive), addressable polymorphism (Invidi, Navic, OpenTV, Visible World), lifestyle divination (Acxiom, Ads-vantage, Allant, Experian, Quantcast), click stream numerology (Nielsen, TiVo, TNS, TRA, Rentrak), ad auctioning transmutation (Google TV, Invidi Media, Navic's Admira, NCC's Smart Purchase Engine), shape shifting (Alcatel-Lucent, Biap, Ensequence) and an obscure reference to a primitive form of water transportation that materialized momentarily and got CAMmed but purports to be the stuff of legend. To date, our intelligence continues to reveal little about the farsight of the digital terrestrialists other than the mobile video initiative that would enable mobile video subscribers to receive their channels - for a subscription fee, of course and their burgeoning endeavor to deploy more video on their local web destinations.

  • 1 comment about "The Forging Of The Fellowship Of The Digital Rings Broadens ".
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    1. Tavo Castro from Carat, August 5, 2009 at 9:29 p.m.

      Hahaha, nice use of LoTR metaphors, spoke a while back when you were still at Carat. With Cablevision being the only MSO even talking about a full roll-out of addressable advertising trials to it's albeit smaller footprint, when do you foresee household-level addressability becoming more than a limited trial reality? 2-3 years? How will brand advertisers be able to justify the premium on the eventual CPM, will it only be justified through more of a direct marketing approach (i.e. MSO sub list matchbacks to new customers, etc.)? Appreciate any insight.

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