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April 25, 2007

The On-Demand Universe

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The term "on-demand" is the "linkbait", "long tail" and "web 2.0" of this year’s conference season. You just can’t get away from it. I suspect we’ll be hearing it quite often during today’s The On-Demand Universe session with moderator Brian Wieser (MAGNA Global) and panelists Warren Schlichting (Comcast Spotlight Advanced Media), Aaron Radin (CBS), George Ehinger (Revision3 Corporation), Bob Martin (Universal McCarnn). Just a hunch.

I’ve officially missed all the panel introductions because I arrived at 10:44am for a 10:45am session. Apparently that made me late and I have no idea which face belongs to which name. I apologize for my inadequacy.

The first question at hand for the panel is how quickly does an industry change? How long before we’re all living in a video on-demand (VOD) world?

The answer seems to be not as fast as we like. The industry structure is being held together by regulations. It’s not a given that just because we can do it, a new media platform will become successful and/or ad-supported.

Something interesting is that despite all the talk about VOD, studies done by Comcast show only a modest growth per household. Even though there’s been an enormous rise in the wealth of content available through VOD over the past year, there was only a 4 percent increase in VOD services last year. Only 2 percent of the market logs onto ABC.com to watch rebroadcast episodes of Lost or Desperate Housewives.

The panel asks: Do people actually want these services?

I think the answer is yes. People want to be able to watch what they want when they want it. We like to be annoying. One speaker noted that human beings like convenience. If content producers can give them every show that they want when they want it will create a great experience user experience. However, when it’s not convenient and the list of choices is incomplete than you have people waiting on the sidelines to get in. And that’s where we are right now. Users are watching VOD from the sidelines waiting to see what’s going to happen before they commit. Ultimately though, users will want that content because it’s content that’s tailored to them.

The question right now is what is the unique value that the VOD distributor is offering the consumer during TV viewing hours? Why would they watch video on demand instead of the prime time shows they’re used to watching? What percent of the TV viewing can be garnered by video on demand? That’s what we’re still trying to figure out.

One panelist remarks that his company’s goal is to get everything on video on demand. That is the goal. Until that happens, however, until VOD is everywhere, it’s not going to be adopted by anyone but the tech savvy consumers. The main problem with VOD is that everything you might want is not available right now.

Something the panelists noted is that there are now two primetimes where advertisers are trying to reach users through video. There’s the work day prime time and the traditional evening prime time. The new work day prime time is that group of people using broadband at work for eight hours of the day. They’re a bored, captivated audience pretending to be hard at work.

Advertiser’s have a lot of investment requirement when doing anything with new media. Things they need to be aware of include:

  • Critical mass of unduplicated/unique reach
  • Uniform technological standards
  • What is the optimal creative formats
  • Smooth buying process
  • Is the data we need in place
  • High-quality service and product standards

As an advertiser, before you get involved with VOD you need to decide what your goals are. What are you trying to achieve?

Another reason for the slow adoption of VOD is that there’s a high barrier to entry. Think about VOD compared to traditional banner advertising. What does it take to produce a high quality video advertisement vs. a banner? There’s certainly a lot more effort and funding needed for quality video than for a static banner ad.

And how many advertisers actually produce high quality video content? Not as many as those who can produce banner ads. Bob says that there’s an expectation from the media/sales perspective that this is wonderful. That may be true but we still have a long way to go in terms of standardization before we can buy this media and have it make sense in terms of ROI. Part of that process includes informing the viewers that there is more content out there if they want it.

What about the logistics of VOD buying and selling? Why is so difficult to get big businesses to sign on? The panel notes the following:

  • Agencies with legacy T V business behave differently than agencies with legacy offline businesses.
  • Zero based planning is uncommon. Buyers need benchmarks to justify buys. Right now they have none.
  • Most sales organizations have commission structures favoring traditional media.
  • There is resistance to change because it’s very difficult to give up the business and the profit structure that you’ve set up to date.

George claims that we can’t expect the creativity and the solutions to this problem to come from the CBS’s of the world because they have things that will not allow them to become the quickest movers. It was kind of surprising to hear George say that. Not because it’s not true, but because it something I wouldn’t want someone from a large corporation to admit to. If you know you’re not the quickest mover because you’re hanging on to legacy marketing tactics, then you should be working to change that. That’s the only way you’re going to grow.

There are hundreds of new media alternatives today. Advertisers can choose to use broadcast, stream and download, push and pull, unwired or wired, home and portable, etc. With all these new platforms, nationally-oriented, brand-based advertisers need broad targets.

George says he would not want to be in the chair of the person responsible for reaching mass eyeballs in this world of fragmentation. I don’t entirely blame him. Things are getting tougher. However, I have faith. As the panel notes, advertisers found a way to overcome magazines, the assortment of cable channels, etc, so there is hope they’ll be able to find new ways to advertise in an even more fragmented space. We’re heading into a world where measurements for the advertisers around engagement and clutter are going to be very important.

Once we’re living in a pure VOD environment standards will be set to help advertisers localize their efforts. VOD doesn’t have to be the mass advertiser’s only solution.

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