New Platforms, Old Business Models

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Of all the old business models, the
traditional 30-second spot once seemed a likely candidate
for extinction in the world of digital media. Consumers
could fast forward through them on their DVRs—now in
about 38% of all homes—or even avoid many of them altogether
by watching shows on VOD or online, where sites
like Hulu carry a much lighter ad load.

Yet, TV advertising, much of which still revolves around
traditional spots, has actually grown as a share of total advertising,
accounting for 40% of the total ad spend in 2010,
up from a 32% share in 2000, according to Magna Global.

“Television is the worst form of advertising, except for all the
others that have been tried,” quips Brian Weiser, executive VP,
director of global forecasting at Magna Global, paraphrasing
Winston’s Churchill’s comment on democracy.

The traditional spot and TV ad models also show signs
that they can evolve with the times.

Cablevision has rolled out advanced advertising services
throughout its footprint and now offers advertisers a variety
of options, including a addressable or targeted system that
can serve different ads to different homes and demographics
groups; telescoped ads that allow viewers to click on a 30-second
spot and be taken to a channel where they can get more
information; dedicated showcase channels with video on demand
content; and interactive features that allow consumers
to request additional information, coupons or product samples.
Next year, Cablevision will be adding t-commerce features
so consumers can directly buy products with a press of
the remote.


“Advanced advertising has proven to be a real complement
to our business, not a substitute for the 30 second ad,” notes
David L. Kline, president and COO, Rainbow Advertising
Sales Corporation. “We don’t see the 30-second business
going away; as a matter of fact, these advanced advertising
platforms have has strengthened the value of a 30-second
spot. We have had the highest growth rate of any MSO in
terms of advertising quarter after quarter.”

Few MSOs are that far along in the deployment of advanced
advertising systems but all of them are seeing signs
that ad models for the delivery of content to other platforms
are beginning to jell.

A few developments in the VOD space are instructive. Early
on, VOD platforms on cable struggled to get the most popular
content from broadcasters and cable networks because
programmers feared they would lose viewers, and as a result
ad revenues, on their linear channels.

Operators have moved to overcome those fears by pushing
Nielsen to include VOD in ratings and by disabling the
fast forward button so ads can’t be skipped, notes Steve Necessary,
vice president, video product development and support
at Cox Communications.

Over the last year, those developments have helped Cox
“increase by 60% the amount of standard def episodes and
double the amount of HD episodes” on its MyPrimetime
VOD offering, Necessary explains. More than 20 programmers,
including Fox, ABC, and NBC, are providing about 600
shows a month.

Mike Hopkins, president of affiliate sales and marketing
at Fox Networks, agrees that better measurement and the
disabling of the fast-forward button have changed the discussion
on VOD. “In the last year, we’ve made a lot more content
available on demand, particularly from the broadcast
network. We now have a VOD offering that has about 90% of
what a viewer would expect to see on Fox.”

Fox has also rolled out a broadband product, Speed 2, that
offers extra races and content not available on the Speed
linear TV channel. “It enhances
the value of the
linear subscription.”

While Fox has taken
a cautious approach
to multiplatform delivery
of their content, Hopkins
stresses that online
and mobile delivery of
content through TV Everywhere
initiatives will
be important for the industry’s
future. “We are
working with operators to
find the right balance on
the economics of those
rights so that we can preserve
our ability to monetize
our content and at
the same time satisfy consumer demand for time and place
shifted content,” he explains.

Cable, satellite and telco operators are expected to expand
the reach of TV Everywhere, or authenticated multiplatform
services, to about 70 million homes in 2011, which
would put those services in about two thirds of all multichannel

One major reason why many programmers have been so
willing to make their content available to those offerings
can be traced to developments that mirror earlier improvements
to the VOD system.
Some operators are disabling
the fast-forwarding
button for online authenticated
content and Nielsen
is working on a system that
would deliver combined
ratings for TV and online
viewing as long as the online
offering has the same
ad load and is viewed within
three days.

“We worked closely with
Nielsen to extend the C3
ratings to VOD in 2008,”
adds Matt Strauss, senior
VP and general manager
for Comcast Interactive
Media. “That was a big
milestone, and now we are
working to extend the rating
system to online.”

That will essentially
transplant the traditional
multichannel business
models to online content
and strengthen the overall
TV business by giving
consumers the ability to
watch content they’ve paid
for on other platforms, argues
Jack Wakshlag, chief
research officer for Turner
Broadcasting System.

“It works for the consumer
because they get all
the content they’ve already
paid for not just on TV but
online and mobile,” he explains.
“It works for me as
a programmer because I get credit for those online ad impressions
and it strengthens my relationship to the cable
operator because I don’t have to go over-the-top or around
my relationship with the operator to deliver the online content
people want. We think this is a financially viable and
tenable model.”


While Comcast and AT&T have launched massive libraries
of authenticated online content, Verizon has taken a
more selective approach. “I’m not sold that the best approach
is to throw up 100,000 titles on the web,” notes
Terry Denson, VP of content strategy and acquisition at

Currently, Verizon is focused on offering content from 20
leading programmers and is offering an online selection of
around 5,000 titles, which it plans to increase in 2011.

Verizon has also worked to enhance the multiplatform
experience of the content it offers on TV, online and mobile
with products like Flex View, which allow users start and
stop watching movies on one platform and resume watching
on another.

Some distributors are making online content available
for free; others are charging extra or providing the content
free only to subs who take the most expensive tiers. Likewise,
some distributors that offering multiplatform content available
for free are balking at the idea of paying programmers
an extra fee while others may be willing to pay higher license
fees if they can recover those costs from consumers.