Viewing VOD as a Marketing Tool

Apr 25, 2005  •  Post A Comment

By Claire Atkinson

Advertising Age

If you don’t know VOD, your career is DOA.

A year ago video-on-demand was the sole prevail of cable operators that made a few million dollars selling a selection of movies to their customers on a cost-per-download basis. Now it is being variously hailed as the Holy Grail or the doomsday device for the entire ad business-and has become a must-understand for all marketers, agencies and TV executives.

VOD dominated talk on the floor and at the podium at the recent National Cable & Telecommunications Association annual meeting, just a month after this time-shifting TV tool was the focal point of the American Association of Advertising Agencies’ Media Conference. And it’s not just hot air where marketing applications are concerned: In recent months Procter & Gamble Co., Coca-Cola Co., General Motors Corp. and Keebler have all unveiled VOD ventures, working with Comcast, Viacom, Time Warner and Gemstar.

It’s easy to see why marketers are excited, because there is an opportunity here for them-or their agencies and production companies-to create their own branded “watch it when you want” content. Home Depot can create a series of informational shows, complete with an interactive offering allowing viewers to purchase the relevant materials for the job; GM is already airing close-ups of its vehicles; Nike could make its entire ad archive available to the public via VOD, so consumers can watch those Wieden & Kennedy classics whenever they want.

And that’s to say nothing of the potential for refreshing ad content in old shows that are available via VOD. In short, if the content is compelling, VOD could be the ultimate targeted, opt-in advertising medium.

“VOD is the next frontier in many ways,” said Jon Kamen, chairman-CEO of Radical Media, a leading commercial-production company. “It’s not really about format or time. It’s about content and it is unique in its opportunity because of the ability to deliver rich content and to provide knowledge. It’s just incredibly applicable to our times.”

VOD also offers marketers the promise of convergence-linking the rich and interactive media of the Web with the TV experience. As Paul Allen, chairman of Charter Communications, explained during a session at the National Show, if viewers are ad skipping, VOD offers advertisers the opportunity to insert pop-ups as the ads are fast-forwarded. When clicked, the pop-ups might link to information about the product.

Still, only a minority of consumers have VOD in their homes, and revenue is still limited. Forrester Research estimates 28.8 million homes will have VOD by the end of this year, a figure that will rise to 44 million by 2009. That relatively small penetration has so far restricted revenue. Comcast, for example-the nation’s biggest cable company, with 21 million subscribers-reckons it racked up around $19 million in VOD sales in 2004; it offers VOD services to about 8 million digital customers.

Nevertheless, Comcast CEO Brian Roberts expects a major upswing in those numbers in the near future, and is moving aggressively in this arena. He expects Comcast customers will order more than 1 billion VOD sessions by the end of 2005. And Comcast isn’t alone: Now that cable operators have largely built out their pipes for delivery of everything from VoIP, HDTV to VOD, they’re in sales and marketing mode; and they find that those who do have VOD in their homes adopt it quickly.

“The average user of VOD views 27 shows and equates to 12 hours a month of on-demand viewing. Average use per household per month is 27 times,” said Page Thomson, VP and general manager of Comcast on Demand.

In trying to buoy adoption, Comcast is following a Yahoo! model, trying to build the audience by offering free content. Comcast’s thinking is that advertisers-either seeking to sponsor existing VOD content or create their own-will follow as the audience grows. Vicki Lins, VP and marketing and communications, Comcast Spotlight, the cable operator’s ad-sales department, said, “We have more than 2,200 programs and expect to see it grow to 10,000-20,000. Just look at the content building. It really speaks to the momentum.”

Comcast is wielding its power to get individual channels to create content for this VOD push. Already consumers with digital cable can sit down to literally hundreds of hours of free programming whenever they want to call it up. The Comcast on Demand platform for March included instructional TV shows on poker, two-minute videos of singles looking for love and weekly highlights of soccer goals from around the world. Such strictly targeted shows sit alongside better-known output from National Geographic, History Channel, MTV, Nickelodeon, Cartoon Network and news from NBC and CBS.

At the cable conference, NBC Universal and other Hollywood studios were talking to operators about how they’d be compensated for adding movies and current TV shows to the mix. NBC President Bob Wright said he was having conversations with both Comcast and Cablevision about a VOD play, and predicted NBC will have something ready by next year. “I’m a fan of the network-oriented VOD model, which will be safer and protect the ad revenue,” Mr. Wright said. In essence, Mr. Wright’s model would mean licensing already-aired network shows, complete with all their ads, to the cable operators for their VOD channels.

That’s a model that would protect ad revenue for the networks, who are trying to work out if they can own a piece of the VOD pie. Unlike the threat of digital video recorders that can give viewers the option of skipping ads-and therefore scare marketers, agencies and TV networks alike-VOD is seen by many in the industry as a way to get consumers to invite ad messages into their living rooms. At the same time, VOD may also be a way for programmers to get revenue from viewers and lessen their reliance on advertising. Time Warner is already on board with subscription and premium services like HBO on Demand.

Either idea for the emerging technology is a radical altering of the traditional TV ad model.

Pete Blackshaw, chief marketing officer at Cincinnati-based Intelliseek, a company that tracks online buzz about technology products, said VOD is generating a huge amount of interest: “We’ve seen a rapid uptick in consumer interest, through message boards and blogs.” The appeal factor is so high that VOD could eclipse the Internet in terms of consumer value. He gave the example of watching a VOD program on making cr%E8;me brul%E9;e, when previously he might have gone online for a recipe. “It’s very sticky,” he said commenting on the appeal of VOD, not his cr%E8;me brul%E9;e.

So much depends on how the VOD measurement model evolves.

Nielsen Media Research is due to reveal its plans for sampling in VOD homes by May. Already, publicly traded firm Rentrack, which began life providing instant video-rental details for Hollywood Studios, has agreements with the main cable operators to provide third-party analysis of who’s watching what. Rentrack has measurement deals in place with Comcast, Charter, Cablevision and Insight Communications. Rentrack allows each vendor to see data about how their own service is used and comparative data on similar channels, but not about specific competitors.

For each title, Rentrack can provide total views per set-top box for each title, unique set-top-box use and total minutes viewed. Rentrack reports also provide fast forward, rewind and pause details.