VOD Came Alive in 2005

Jan 2, 2006  •  Post A Comment

Video-on-demand grew during 2005 in three critical areas-advertising, distribution and programming-despite the fact that just a year ago the lack of a workable viewer measurement system posed a threat to the very future of the VOD business.

Several niche on-demand services launched in 2005, including Ripe TV and PBS Kids Sprout, and big media finally joined in via the watershed deals inked last fall, including Comcast’s agreement with CBS to deliver prime-time shows on-demand in markets with CBS-owned stations starting next year.

All this business activity occurred against the backdrop of increasing consumer usage of the platform. Consumers have grown more fluent in use of on-demand, said Paul Rule, president of VOD research firm Marquest Research. In homes that have the service, about 88 percent of adults said they had used on-demand at least once during 2005, compared with 65 percent who used it at least once in 2004, he said. The frequency of use has also grown. In 2005, of the consumers who used on-demand, about 53 percent used it at least once a week, compared with only 24 percent who used it once a week in 2004.

Challenges Remain

But there are still areas where VOD is lacking. The release window for hit movies still lags behind the video stores, making some VOD movie fare seem stale. Also, cable networks for the most part still offer their “B” fare on-demand. But the CBS deal, along with NBC’s pact to offer prime-time shows to DirecTV customers on their digital video recorders and ABC’s delivery of prime-time shows on-demand to iPods, certainly suggests that the industry is interested in sending high-profile shows to new distribution platforms.

So despite the vocal and sometimes vitriolic proclamations made at industry conventions that the sky would fall on VOD this year, it decidedly did not.

“From the very beginning of the [American Association of Advertising Agencies’] attempting to coerce the cable operators into delivering on-demand metrics, [the effort] has been nothing but headlines, and there has been no substance,” said Mitch Oscar, executive VP of Carat Digital. He’s been a proponent of getting advertisers into VOD first to learn about the medium, betting that data will come in time.

“We haven’t been able to get any metrics and it hasn’t made a bit of difference,” he said. “The industry has spun forward.”

In the past year, Carat clients that have stepped up to the VOD plate include Schick in Music Choice, Anime Network and Cartoon Network’s Adult Swim, while Hyundai has created unique content for History Channel on-demand, he said.

Last month Chase introduced a long-form VOD campaign in Comcast’s Philadelphia market explaining the features of Chase Blink, a new service the bank company is introducing in select markets that allows merchants to quickly scan a credit card. Chase is a Carat client, and Mr. Oscar worked with the company, along with VOD creative agency Words and Pictures, to develop the campaign.

Not on Sidelines

The Turner networks added several new VOD advertisers last year, among them Genworth Financial, American Express, Bowflex, Navy, Army, Schick, Nike, E-Loan, Maxwell House and Tylenol.

“There are a growing number of clients that see enough momentum that they don’t want to sit on the sidelines and wait,” said Chris Pizzurro, VP of multimedia marketing for Turner. Advertisers are willing to go forward with the data that Turner can offer at this point-total impressions and unique impressions-because VOD represents another brand extension, he said.

VOD-only nets are luring marketers too. Ripe TV launched in the fall with advertisers including Procter & Gamble’s Old Spice, Dodge, Midway, Boost, Warner Bros. and Electronic Arts. Advertising is sold out into the first half of 2006, said Ryan Magnussen, Ripe TV CEO.

Comcast Spotlight last year added long-form advertisers including Reebok, Publix and Paramount.

Progress in measurement came in small pockets in 2005. On-demand service Music Choice made the bold move last fall of guaranteeing to advertisers that they would pay only for spots that were seen, not just fast-forwarded. There aren’t any other on-demand programmers who make that guarantee yet, but Music Choice encodes its content and ads as separate assets, making it possible to track the views of the ads through its relationships with measurement firm Rentrak.

Progress Seen for 2006

Rentrak also inked deals in the fall with 12 additional VOD programmers, including CBS, MTV, Nickelodeon, National Geographic Channel and Ripe TV, to provide them with measurement data. While that data won’t yet include information on whether ads were fast-forwarded or rewound, it represented a step forward in measurement.

More progress will come this year, said David Porter, director of new media for Cox Media. Cable operators such as Cox, Comcast, Time Warner and Cablevision have been meeting throughout the year to define the metrics they will report to advertisers and programmers and he expects more data to come next year, including views per ZIP code, views per daypart and the first reports on fast-forwarding data, he said.

Cox has also grown its on-demand programming in the past year, adding 400 hours of content. It expanded its free fare with content from A&E, Discovery, Discovery Kids, DIY Network, E! On Demand, Fine Living, Food Network, HGTV, History Channel and NFL On Demand and added subscription services, including HBO and Cinemax, Starz on Demand and Howard Stern on-demand.

Rainbow Media garnered more distribution for its niche on-demand services. Thanks to a Comcast deal, sportskool expanded from 1.5 million homes to 13 million, while sister service Mag Rack rose from 2.75 million to 5 million homes.

Comcast added more content, upping its VOD fare from 2,800 programs comprising 1,600 hours at the start of last year to 3,800 programs comprising 2,200 hours. That includes additional movies from Starz Encore as well as networks such as VH1 and PBS Kids Sprout.