Source of Innovation

Oct 3, 2005  •  Post A Comment

By Daisy Whitney

Special to TelevisionWeek

Time Warner Cable’s system in Hawaii has become a market of firsts. The cluster of islands three time zones away from the mainland was the first to introduce pizza on-demand, interactive advertising technology from Navic and one-screen interactivity with gaming network GSN. Now it’s the first cable system to test a census-based audience measurement system from the British firm TNS.

Such pioneering work in interactive and next-generation TV is helping the system to boost local sales revenue and expand beyond the 30-second spot into new ad platforms.

The cable system in the Pacific has a bit of a renegade attitude and has been referred to as a fiefdom, perhaps because its isolated locale allows it to take chances that might not be possible for a system in high-profile New York.

“We are out here by ourselves,” said Nate Smith, president of Oceanic Time Warner Cable. “We have to sort of fend for ourselves. If something breaks, we have to fix it. It’s also safer to test things out in Hawaii.”

The system is a cable general manager’s dream. Honolulu, the largest city in Hawaii, is the 71st-ranked market with 417,120 TV homes, according to Nielsen Media Research. About 90 percent of those homes have cable, and the return address on all of their bills is Oceanic, since it’s the only cable operator in Hawaii. Only 4.5 percent of homes have satellite, representing the highest penetration of cable and the lowest for satellite among the 210 local TV markets, Nielsen said. Oceanic counts 397,000 subscribers and passes about 540,000 homes.

Oceanic serves all of the Hawaiian islands from a single headend through an underwater fiber, enabling its entire designated market area to have the same channel lineup. That’s another reason testing new services in the tropical paradise is easy.

While the 30-second spot remains the framework of the system’s ad sales approach, Mr. Smith said, Oceanic is experimenting with new ad venues. “We are trying to look past the 30-second spots and create environments to let consumers make their own choices,” he said.

That includes offering food on the TV. The system is well known in interactive TV lore as the market that first introduced pizza on-demand back in 1999, enabling a viewer to use the TV screen to order a Pizza Hut pie for delivery.

During Pizza Hut commercials an overlay appears and asks, “Are You Hungry?” said Maryann Sacharski, general manager of media sales for the system. Viewers are then routed to an order page where they can load up their pizza with toppings. The “Are You Hungry” overlay is used in local sports in particular, such as in the first period of a live football game, so viewers can have their pizza before halftime.

Oceanic expanded the pizza offering this year to an entire food court, adding local Chinese, Hawaiian and Korean restaurants for takeout orders and some delivery. Oceanic gets a cut of the revenue from the restaurants. The food court is still in its infancy, but Mr. Smith said the next step is to expand the service into a “marketplace” concept, allowing viewers to buy all sorts of products from local merchants such as florists or gift stores. Oceanic could also add virtual storefronts for networks, such as a Nickelodeon virtual channel for “SpongeBob SquarePants” gear or DVDs from HBO, he said.

Oceanic is considering selling DVDs and CDs in the music section of its on-demand service, creating a commerce model for the video-on-demand platform, Mr. Smith said.

“The key in business is being able to differentiate yourself. All of these things are just aspects that make Oceanic different,” Mr. Smith said.

That’s important because broadcasters still claim the lion’s share of local ad sales revenue, but that’s starting to change too, Ms. Sacharski said. Ad revenue is growing year to year, and Oceanic’s share of dollars is rising. She declined to specify by how much but did say that a large portion of the growth comes from the system’s interactive ad capabilities.

Oceanic was the first system to deploy Navic technology, in September 2002, with addressable advertising that included a poll for one of the 2002 gubernatorial debates, Navic said. Time Warner announced a corporate agreement with Navic earlier this year that guarantees deployment in several major markets.

Oceanic peddles Navic’s capabilities to enable advertisers to create information request options, long-form VOD links, trivia and polls. Local advertisers include Jackson Auto Group, the Office of Hawaiian Affairs, Remington College, Bellevue University and Kaiser Permanente.

Navic has said that its cable operator clients have seen an increase in local ad sales revenue in excess of $10 per subscriber per year after they introduce interactivity as an option for local advertisers. That’s partly because Oceanic, and other systems, can report back to advertisers on how many viewers engaged in the interactivity, where they went and how long they stayed, Ms. Sacharski said.

Hawaii was also the launchpad for GSN’s new one-screen service GSNI, said Jan Hatcher, senior VP of distribution at GSN. Oceanic rolled out the one-screen interactivity there in April 2004 and reports that about 85 percent of GSN’s interactive viewers are playing along with the programming and interacting with the commercials. Oceanic reported a 10 percent increase above its normal weekly digital sales after a digital upgrade campaign earlier this year that included the GSN service. GSN’s decision this summer to roll out GSNI nationally came in part from its experience in Hawaii. “It was a very easy decision when you saw the results,” Ms. Hatcher said.

Last year, Oceanic began a trial with audience measurement firm TNS to measure more than 200,000 homes on a census basis, marking TNS’s debut in the United States. TNS plans to add a sample in Hawaii so it can include demographic information with its census data and report on all TV viewing.