[opendtv] News: Users Don't Want VOD To Be C.O.D., Want It Free

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
  • Date: Wed, 11 May 2005 07:36:39 -0400

"Voluntary audience interactions are worth far more than impressions..."

Josh Bernoff is at it again with new research on the emerging markets 
for cable based VOD services. As I have been predicting, VOD is 
facing an uphill battle against the PVR, which offers viewers the 
ability to cache their favorite programs (legally), with the added 
benefit of being able to skip the commercials.

But VOD could find a place in American homes with a modified approach 
to the presentation of targeted advertising in place of the ads that 
ran when an advertiser supported program aired originally. As Bernoff 
points out in the following story, advertisers place far greater 
value on interactions initiated by the viewer, than the presumed 
"impressions" upon which today's shot-gun ad supported programming 
models are based.

The problem is one that i have noted frequently as a major drawback 
to "Free VOD" services...

You can't give away something if it costs you money. Unlike PVRs, 
which are currently protected by the Fair Use rights established in 
the Betamax decision, cable operators cannot make programming 
available via their VOD systems without permission form the content 
owners. At the moment the content moguls are demanding additional 
payments to offer programs that are available OTA, and in extended 
basic cable tiers, via their VOD systems. The cable companies note 
that with VOD the viewer cannot skip commercials, and that they have 
already paid for the content once via subscriber fees and/or 
re-transmission consent fees; they are generally refusing to pay 
extra to offer these programs on demand. And then there is the 
reality that the cable systems must recoup the investment in the VOD 
infrastructure - using it to deliver free programming does not 
generate any revenues.

For FVOD to succeed, a new advertising model is needed. In general 
terms the cable system must collect additional revenues from 
advertisers to pay for the delivery infrastructure and the content. 
Then a portion of this revenue must be shared with the content 
owners. The most likely prospect for such a model is to replace the 
shot gun ads with targeted ads that will stimulate the audience 
interactions that advertisers are willing to pay a premium for. This 
might take the form of an "opt in" ad at the beginning of a program 
with in-depth info about a product and the ability to click through 
for more info.



Users Don't Want VOD To Be C.O.D., Want It Free
by David Kaplan, Monday, May 9, 2005 8:00 AM EST

THE LACK OF FREE CONTENT appears to be suppressing demand for 
video-on-demand (VOD) television services, suggests new research from 
Forrester Research.

  VOD is now available to nearly 19 million homes--or about 75 percent 
of the U.S. digital cable universe, Forrester's Josh Bernoff notes in 
his report on the various ad models for VOD. While movie buys and 
usage of subscription content such as HBO On-Demand are increasing, 
the model is languishing to some degree, largely because of the 
reluctance of cable operators to pay for quality programming.

  Comcast, the nation's number one MSO, refuses to pay directly for 
FVOD content. For the most part, other operators feel the same way, 
Bernoff said.

  "With cable bills at an all-time high and satellite picking off 
price-conscious subscribers, cable is sticking to its story: 'We paid 
for this content on linear channels, and we won't pay extra for 
on-demand rights,'" he said.

Selling advertising is therefore the obvious solution to this 
problem. As Bernoff notes, for advertisers, ads in on-demand programs 
could win back some of the viewers lost when digital video recorder 
users skip commercials. For networks, these programs could increase 
audiences by capturing viewers who missed programs at their original 
airing time. And if ads encourage the producers of popular programs 
to place them in free on-demand areas, consumers--and cable 
operators--will also get what they want.

  Still, Bernoff said that despite the best efforts of the advertising 
industry, marketers have yet to get excited about VOD.

  "[VOD] experiments have brought in less than $15 million in ad 
revenues so far," Bernoff said. "Why? Because there's no viable model 
yet for on-demand advertising."

  The main hurdle to overcome is measurement, Bernoff said. Once a 
viable system of metrics can be instituted, "advertising on demand" 
will help gain approval from marketers to support VOD.

  As for the types of models advertisers and cable operators should 
look to, Bernoff cites TiVo's Showcases--which allow viewers to 
opt-in and watch long-form spots from advertisers--and Google, which 
sponsors "pay by the click."

  "TiVo showcases benefit from links in spots," Bernoff said. "TiVo's 
3 million subscribers can view its long-form ad showcases--which are 
a lot like Cox's FreeZone videos. But TiVo doesn't sell its showcases 
just hoping that viewers will trip over them. Instead, it drives 
viewers to the long-form ads, using links from its main menu and from 
traditional TV spots. Ads for the movie "The Interpreter," for 
example, contain invisible "triggers" that pop up an icon on TiVo 
screens during an ordinary commercial. Viewers who are interested in 
the movie can jump into the showcase and learn more."

  So the key idea is that TiVo Showcases are worth far more "when you 
drive traffic to them."

  As for Google's pay-by-the-click sponsorship model, if you search 
for "Seasonal allergies"--and GlaxoSmithKline is happy to pay a dime, 
or maybe a dollar, to direct you to "ibreathe.com"-- you can learn 
about Flonase, Bernoff noted, by way of example.

  "Paying by the click has turned search advertising into a 
billion-dollar business that accounts for nearly as much revenue as 
online banner and display ads," he said. "In the same way, we believe 
advertisers will pay far more for each viewer who clicks through to 
its video showcase. Voluntary audience interactions are worth far 
more than impressions."

  Bernoff advises advertisers to invest in advertising on-demand 
format as soon as Comcast and Time Warner Cable make it available, 
which he expects to happen within the next 18 months.

  As for viewing habits, for people with digital video recorders, all 
video is video-on-demand, as a new survey from Newton, Mass. Tech 
analyst Lyra Research finds that DVR users watch more VOD programs 
than non-DVR users, and these findings held true for both free and 
paid VOD.

  While it seems a bit surprising considering the general assumption 
that DVR and VOD technologies are competing for viewers' usage, this 
is not so, said Steve Hoffenberg, Lyra's director of electronic media 

  "We had anticipated that the DVR users would particularly watch less 
free VOD than the non-DVR users because DVR users can readily 
time-shift and control their TV shows without using VOD," Hoffenberg 
said. "Our findings may be because VOD offered content that was not 
available via broadcast or because the DVR users are more experienced 
than non-DVR users with time-shifting, and more comfortable operating 
menu-driven systems for selecting programs. This will be an important 
topic area to clarify in future DTV View research."

  Right now, however, VOD and DVR usage is fairly low, Hoffenberg 
noted, adding that the study looked at 350 cable-TV VOD users across 
the country. Also, for VOD, the program offerings are limited, and 
the technology doesn't inspire much consumer enthusiasm, at least 
according to some of the respondents, he said. As one survey 
respondent commented, "VOD is still a work in progress."
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