Hitting Pause on Fast Forward
In Search of a Business Model, Operators Nix Ad-Skipping
By George Winslow -- Multichannel News, 10/7/2007 8:00:00 PM
After years of struggling to make the most popular broadcast and basic-cable shows available on demand, operators seem to have hit on a successful strategy: Just say no to fast-forwarding through ads.
Time Warner Cable first hit on the idea in 2005 with its “Start Over” feature, which lets digital subscribers restart live programming but doesn’t allow them to skip ads. The operator has convinced over 130 programmers to participate in the feature, which has been deployed in six markets, with more to come later this year.
More recently, Cox Communications announced that it would make select ABC and NBC fall shows available on demand to digital customers in its Orange County and Palos Verdes, Calif., systems. Besides disabling the fast-forward feature, the trial is also notable because at some point early next year, the Cox systems will begin dynamically inserting ads into the VOD content.
“The Cox trials are the first, and best example of how a business model for advertising might be developed,” said Brian Wieser, director of industry analysis at media buying firm MAGNA Global. “If the trials are successful, this could be a template for the industry and begin to provide a strong business model for on-demand content.”
“Typically, all of the primetime shows that garner the highest ratings are less represented on VOD than a lot of viewers would like. To take VOD to the next generation, we need to create a business model for VOD with advertising,” said Jonathan Bokor, vice president of business development at Tandberg Television, which is working with Comcast on VOD advertising.
“There has clearly been a lot of hesitancy on the part of broadcasters to make their shows available,” added Steve Necessary, Cox vice president of video product development and support. “By disabling the fast forwarding functionality during the commercials, we made a conscious and deliberate accommodation to the programmers so the value of the advertising that underpins so much of the video delivery business can be preserved. The consumer wins. The operator wins, and the programmers and the advertisers win.”
Henry Ahn, NBC Universal TV Networks Distribution executive vice president, also highlighted the importance of preventing users from skipping ads: “We need to engage our viewers and provide advertisers with full value for the ads they place. The operators have heard that loud and clear and their decision to disable the fast forward was a key factor in making our content available,” both in the Cox trial and in Time Warner’s Start Over.
Cox will begin testing dynamic insertion in a few markets in early 2008, using SeaChange products.
“The ability to deliver targeted ads will allow operators to grab market share from the Internet, print and direct marketing,” argued Tom Rosenstein, vice president of the Infrastructure Software Group and Alliances at SeaChange International, which is working with Cox on the project.
But Rosenstein and NBC Universal’s Ahn admit that a number of particulars still need to be resolved, including how VOD advertising revenue will be split between operators and programmers and who will sell the inventory.
Ahn said there are established models for splitting inventory between operators and basic cable networks, though no decisions have been made on how those splits might work on the new VOD ad platforms.
He doubts that broadcasters would be willing to split revenue or give up inventory to cable operators in on-demand programming. “Broadcast is entirely dependent on advertising, and it is not in our interest to give some of that up,” he said.
Another issue is local stations. ABC and NBC own the stations in the Cox systems where the trials are occurring. But being forced to negotiate with a local station group could slow deployments in other areas and give broadcast stations more leverage in upcoming retransmission negotiations.
Cox and Time Warner executives note that disabling fast forward during ads is a small price to pay for having more content on demand. But as DVRs become more prevalent, others wonder if that is only an interim solution.
“The jury is still out,” TVN Entertainment executive vice president Jim Riley said. “Everyone will be looking closely at the result to see if disabling one of the key components of on demand, which is control, has any impact.”
Maria Mendel, senior partner and executive director of digital innovation at OgilvyInteractive, said several other issues also need to be addressed before VOD advertising will blossom.
Last year, OgilvyInteractive worked with Charter Communications, C-COR and Atlas Media in a dynamic advertising test.
While the test worked well and demonstrated the value of on-demand advertising, it also highlighted the need for better back-office and traffic systems, careful measurement and more effective ads, Mendel said.
During that test, consumers were allowed to fast forward through ads. By studying data on how consumers reacted to ads and by testing different ad lengths, OgilvyInteractive was able to modify the campaign and increase viewing by 17%.
“It showed the value of being able to quickly track and improve a campaign,” she said.
But Mendel said dynamic insertion on-demand systems won’t take off until advertisers can plan campaigns across a significant footprint.
During investor conferences in September, Comcast chairman and CEO Brian Roberts highlighted the potential of interactive TV and VOD advertising and announced that CableLabs was working on an industrywide platform for targeted advertising based on set-top box usage. Such a platform would allow operators to aggregate eyeballs much in the same way that Google can in search.
Comcast expects to ramp up the product in 2008 and 2009.
“Having a unified platform would create a lot of opportunities by making it much easier to buy and sell,” said Carol Hinnant, vice president of business development at Rentrak’s OnDemand Essentials, which offers VOD data and solutions for inserting and trafficking for on-demand ads.
Hinnant and others also highlight the importance of programmers and advertisers getting detailed data on VOD usage very quickly. Barry Hardek, vice president of business development and marketing at Everstream, which provides data on VOD usage, said that “it allows them to quickly adapt their programming and advertising.”
Ultimately such data on video-on-demand usage from the set-top will allow advertisers to target campaigns based on the viewing patterns of subscribers.
As the industry waits for the wider deployment of next-generation VOD advertising platforms, some systems with high digital TV penetration are already seeing rapid growth in VOD advertising.
“We’ve gone from VOD advertising being in an experimental stage where advertisers were trying to learn how to better engage consumers to the point where real budgets are being planned” for the media, said Cablevision Systems senior vice president of advanced platform sales Barry Frey. In recent years, Cablevision has worked with almost two dozen national advertisers on VOD and interactive TV ad sales.
One key factor in Cablevision’s success has been a very high digital penetration rate and its deployment of a variety of interactive TV features, Frey said.
Cablevision, for example, set up a Disney Travel on Demand channel, which offers a great deal of long form sponsored VOD content. With one click of the remote viewers can also get travel brochures sent to their home or even have a travel agent call them. “Within three or four minutes, they can be booking the vacation,” Frey said.
VOD Ads Still Trying To Get Personal
11/09/2008Still Trying To Get Personal
11/09/2008MSOs Revamp VOD Strategies
04/30/2006VOD Vendors Fast-Forward Network DVR Plans
07/01/2009Formulas for VOD Success
07/27/2008
