By Sherri Killam-Williams
Special to TelevisionWeek
Endless possibilities await advertisers, programmers and cable operators who jump on the video-on-demand bandwagon.
Figuring out how to make the most of those opportunities, however, is the big challenge.
“I think overall it’s a very young marketplace-only a fraction of the advertisers have gone into video-on-demand,” said Jeff Meyer, senior VP of interactive and emerging media sales for Scripps Networks. “We think it is a viable advertising marketplace for us long term.”
Mr. Meyer said some short-term issues still must be resolved, including figuring out the business model for VOD and finding a way to measure usage along the lines of the Internet’s specificity. “[Advertisers] will know what they’re paying for on a census basis, rather than a sample basis,” he said.
Devising a way of measuring VOD viewership and selling that to multiple system operators, programmers and advertisers is exactly what Portland, Ore.-based Rentrak Corp. has done.
Rentrak users may log on daily to find data-including performance-by title, weekly top titles, comparison by week, titles by multiple system operator and orders by day.
“We have processed over a billion views so far this year, so somebody is watching,” said Cathy Hetzel, senior VP of On-Demand Essentials for Rentrak. That number, she explained, represents both an increase in the number of viewers watching VOD and an increase in operators using the Rentrak system.
Rentrak measures viewership in several ways, including:
It does this by collecting data at the transactional level, much like it collects box office data from movie theaters. Rentrak gets a profile of VOD households by looking at the time VOD is being watched and the shows viewed.
“We follow [privacy laws],” Ms. Hetzel said. “We don’t know who is watching, but we know how many sets are watching. We have an anonymous identifier and we can tell from that information what is being watched.”
Companies can retrieve their information from Rentrak’s database by using a Web-based password.
“It’s certainly an exciting time,” Ms. Hetzel said. “It’s changing the way people think about measurement and what they can expect and how much it’s worth. It’s a whole new dynamic.”
Rentrak’s in Business
Five MSOs currently use Rentrak to measure VOD viewing: Comcast, Cablevision, Insight, Charter and Bresnan.
Programmers currently using Rentrak to measure viewership of VOD are Noggin/The N, Paramount Studios, CBS, MTV, Nickelodeon, Comedy Central, VH1, National Geographic Channel, NFL Network, Expo TV, Ripe TV and Music Choice.
Scripps Networks uses a variety of measurement tools, including surveys, to track VOD usage of its networks Fine Living, DIY-Do It Yourself, HGTV, Food Network and Great American Country, said Michael Pardee, senior VP of research for Scripps Networks.
The data Scripps receives is customized and enables the company to provide analyses of viewership to advertisers, said Carol Cunningham, director of strategic research for Scripps Networks’ cable division. “We also have a marketing component to promote programming within the VOD environment,” she said.
The advertising community must come together with a commonly accepted approach to measurement for VOD to continue to progress, said Comcast Executive VP of Operations David Watson.
“Clearly the No. 1 thing to hammer away on is a measurement system on which all participants can agree and move forward with so that we can help the programming community monetize this,” Mr. Watson said. “We need a measurement system, wherever it comes from: from new entrants such as Rentrak or from established systems such as Nielsen. We need everyone to come together.”
Advertising and network executives generally agree that advertising will grow on VOD as the inventory of available shows grows.
“I see the growth of video-on-demand really depending on the amount of inventory available,” said Michael Bologna, director of emerging communications at Mediaedge:cia. “The beauty of video-on-demand is that we can cherry-pick and exclusively align the brand. We can also get some actual data metrics back to see if people actually viewed it and if it actually worked.”
VOD allows advertisers to look at how consumers are acting, said Mr. Bologna’s Mediaedge:cia colleague Lyle Schwartz.
“While [the viewers] are in control of finding relevant content on what they want-whether they want to be informed on medical issues, listen to music or learn something about cars-they’re more apt to want to learn more from our message relative to this editorial,” said Mr. Schwartz, who is the firm’s senior VP and media director of broadcast. Mr. Schwartz said that VOD’s new environment lends itself to a lot of testing as to what type of advertising works and what the consumer is willing to accept. “With this environment, you don’t have to have a big network to get involved and get a following,” he said. “The clients are excited about the programming. What remains to be seen is if the promise can be fulfilled.”
Interface Too Complex
The toughest part of VOD is getting people to it, contends Mr. Pardee. “When Time Warner and Comcast first started VOD, people didn’t understand how to get to it,” Mr. Pardee said. “There have been improvements in the interface, but it’s still kind of complicated. It really slows down the adoption.”
Continued and better promotion by operators to bring their subscribers to VOD will help drive viewers to the channels, Ms. Hetzel said. “Broadcast networks are looking at bringing many of their shows to VOD, and that will also increase viewership,” she said.
People who have high-definition TV, streaming media and digital video recorders are more likely to adopt newer technology, Ms. Cunningham said.
“They have to make the interface more user-friendly,” Mr. Pardee said. “[VOD] remains sort of fallback viewing. VOD tends to be something you check, but it’s still not the place you check first. Those that have experienced it become loyal users, and it starts to become part of their viewing habits.”
Mr. Watson of Comcast agreed the interface must become easier. “The interface we have is fine for today, but not fine for tomorrow. It’s not intuitive and it’s not easy for the consumer to navigate. We have seen improvements in terms of the interface, and some of those have had dramatic impacts in terms of usage, but we have a ways to go.”
Scripps’ research shows some of the highest usage of its VOD channels on weekend mornings, when viewers may watch a Food Network show to plan a meal or a DIY show on building decks for a home project. While some ads placed in Scripps’ shows are at the beginning, ads that have a tie-in to the show and that offer consumers the option of pressing a button on the remote for a longer message about a particular product line or a how-to lesson have been effective for Scripps.
“It’s a challenge for us to figure out how to market [VOD],” Mr. Pardee said. “It’s more about us getting people to use it. Once people know how to use it, they love it. People love to be able to pause it and go back. The consumer likes to have that control of the TV.”
Advertisers are very interested in interactive television applications, he said, because of the value of that exposure to someone interested in the message: “It gives the advertisers an opportunity to be compelling.”
Scripps Networks refreshes its VOD shows every two weeks, putting up 20 new hours of programming and pulling 20 hours of older programming. Some of the network’s most popular programs are compilations from various shows that may involve a building project or redoing a child’s room. Food Network shows, like those star
ring Rachael Ray, are also widely watched.
Mr. Pardee said he thinks VOD supplements regular TV viewing, rather than cannibalizing it, as some have suggested.
Comcast has established a wide variety of VOD content for its customers, Mr. Watson said. “We are now approaching the point where we have something for just about everyone. Usage has reflected that. Last month, we hit 120 million streams of usage and surpassed overall 1 billion streams since inception,” he said.
Rentrak’s comparison of data from 2004 to 2005 showed a dramatic increase in VOD usage as well. In 2004, there were approximately 177 million transactions by the end of the third quarter compared with a billion by the end of 2005’s third quarter. “We estimated we would process a billion and a half this year, so our estimates seem to be fairly good,” Ms. Hetzel said.
“As search capabilities become better, people will find [VOD] more rapidly,” she concluded. “The next couple of years there will be a focus on interactive advertising capabilities, and ultimately, interactive applications. Television today will continue to morph, which keeps this business exciting.”