• by Joe Mandese  @mp_joemandese, April 14, 2004

In an effort to steer the burgeoning on-demand television marketplace in favor of an ad-supported model, one of the largest media buying groups has called on national advertisers to throw their weight behind the development of an FVOD, or free-video-on-demand marketplace.

"TV's best chance to remain a mass-marketing, ad-supported medium is dependent upon the free, on-demand availability of the best of network and basic cable programming," asserts Brian Wieser, vice president-director of industry analysis at Interpublic's Magna Global USA media buying unit in a white paper issued to the agency's clients.

The report, which provides aggressive scenarios for the growth of two competing on-demand platforms - household-based digital video recorders and cable or satellite operator-based VOD services - also asserts that the rapid deployment of free VOD services will help nip the expansion of DVRs in the bud.

Citing a "proprietary" model, Wieser said Magna predicts DVR penetration will accelerate from 3.1 million households in 2003 to 6.5 million in 2004 and more than 50 million by 2010. However, the agency predicts fewer than half of those households will actually opt to subscribe to premium DVR-based services.

The critical factor for Madison Avenue, says Wieser, will be how TV operators deploy on-demand services, and whether they are based on premium or free, ad-supported models. The extent that conventional broadcast and basic cable programming services migrate to premium on-demand platforms will determine the long-term viability of TV advertising, warns Wieser.

"Advertisers have new opportunities to create branded content for distribution as FVOD," he says. "Long-form programs such as BMW's 'The Hire' and music videos with joint sponsorship of Coca-Cola and Interscope are among the best known examples. As marketers become increasingly familiar with advertising in an on-demand environment, programmers will know they have more freedom to secure top-quality content on-demand. Combined, these efforts will help assure that the dominant platform will be ad-supported FVOD and not the DVR."

Until recently, Magna and its sister agency Universal McCann were the media buying shops for Coca-Cola Co. Bob Flood, executive vice president-director of national electronic media at BMW agency Optimedia, says he agrees with Magna's rapid deployment scenarios for on-demand television technologies, but doesn't believe they are necessarily mutually exclusive. He predicts consumers will utilize the two platforms - VOD and DVRs - in different ways.

"VOD is an interesting technology, but it doesn't take into account all programming. Absent a DVR I cannot watch last week's episode of 'The Apprentice' or 'West Wing,' because that would change the nature of licensing agreements to the point that those shows wouldn't be saleable into the syndication marketplace or to basic cable TV," counters Flood. "I think the two technologies are going to exist side-by-side."

That being said, Flood agrees with the Magna assessment that marketers and agencies need to become "more creative in developing ad applications that captivate the attention of the viewer and hold them to the advertising messages. The genie's out of the bottle. We're not going to put it back in. We have to learn how to work with it, not against it."

Deployment Of Digital Video Reorders/b>

        DVR Households 
2003     3.113 million 
2004     6.486 million 
2005    12.834 million 
2006
22.985 million 
2007    33.577 million 
2008    44.440 million 
2009    47.110 million 
2010    50.300 million 

Source: Magna Global Research projections based on an analysis of company reports. DVR includes cable, satellite and stand-alone units.