Hi-Def TV: Adoption of HD Slow Going for Advertisers

Oct 30, 2006  •  Post A Comment

By David Goetzl

Special to TelevisionWeek

It’s unclear whether Hewlett-Packard will join the parade of Super Bowl advertisers in February. But if HP opts for the $2.5 million spots, its ad agency will lobby hard to produce them in high definition.

Production costs might be 10 percent to 20 percent more, but the return-on-investment upside is substantial since HD spots allow for better sound quality, enhanced resolution and a wider picture-all of which can lead to the increased viewer engagement advertisers crave.

During the Super Bowl, HD advertising also makes sense from a reach perspective. Even though only about 12 percent of U.S. homes are expected to have HDTV service in early 2007, that could still yield some 80 million viewers as HD owners host gatherings to show off their beloved devices.

“If we do a Super Bowl spot this year, I’m going to fight tooth and nail to do it in HD because the majority of people watching in HD are going to invite three to four people over, and it doesn’t cost any more media dollars to run it,” said Josh Reynolds, executive producer on the HP account at Goodby, Silverstein & Partners.

Last February 60 percent of the Super Bowl XL ads on ABC were in HD, including all five minutes by leading advertiser Anheuser-Busch. Even Emerald Nuts ran an HD spot for the second year in a row.

While the Super Bowl remains a showcase, the number of advertisers producing HD ads for routine programming remains small. That’s despite networks, especially ESPN, heavily promoting their HD simulcasts and a proliferation of HD-only networks such as Discovery HD Theater, Mark Cuban’s HDNet and INHD.

“It’s not at critical mass,” said Bruce Lefkowitz, who oversees sales for 10-month-old National Geographic Channel HD. “It’s growing, but it’s a relatively small pool at this time.”

Reasons for the slow pace spin the Super Bowl on its head. Even though HD production costs are coming down, they can still tack on an additional $60,000 a spot, which adds up for a multi-spot campaign. (Networks will “upconvert” non-HD spots, but the quality is inferior.) Also, HD penetration remains limited. Even if nearly 14 million homes have HD service by January, only a still-unknown fraction will be watching individual programs.

There’s also a chicken-and-egg dynamic, where marketers may be shy about breaking the ice until their competitors do. And, surprisingly, in an industry rife with research attempting to justify the benefits of seemingly every media option, there doesn’t appear to be any comprehensive data on the effectiveness of HD spots compared with standard-definition ads.

“There’s an inertia around it,” said Ed Erhardt, president of ESPN/ABC Sports customer marketing and sales. “When someone starts to really recognize that commercials are being watched more because they’re in HD, you’ll see more advertisers and agencies going in that direction. But until there’s data to back it up, it won’t be known definitively that’s what’s going on, although most people feel that way.”

Still, there are signs that HD advertising is gaining steam. Leading media buyer Starcom USA purchased HD inventory in the recent upfront for the first time and is managing placement for about six HD spots outside the Super Bowl, up from none a year ago. INHD says it has twice as many HD ads running as last year.

The country’s two leading advertisers, Procter & Gamble and General Motors, have embraced the format. At least four P&G brands have HD spots in circulation, while GM’s Cadillac is producing all of its ads in HD. And in the recent baseball playoffs on Fox, 50 percent of advertisers ran HD spots.

Growth in HD advertising is expected to continue for several reasons: The appealing demographics of HD viewers, initiatives to gauge the impact of HD ads, Nielsen’s plans to provide ratings for HD viewing and networks’ efforts to persuade marketers to use the format.

“It’s just the tip of the iceberg,” said Joe Abruzzese, president of ad sales for Discovery Networks U.S.

Even advertisers who are reluctant to use HD recognize the benefit of reaching HD viewers. The group is believed to be more upscale, with greater disposable income than the general population, since its members are willing to buy the costly HDTV sets and pay for a premium cable service.

“It makes sense that if you’re looking to talk to an affluent, upscale consumer you should be producing in HD,” said Tracey Scheppach, VP and video innovation director for Starcom.

HD viewers also tend to be young and male-segments advertisers find hard to reach. Leichtman Research Group says males make up 69 percent of HD viewers. Research by INHD persuaded the network to launch a prime-time programming block targeting men 25 to 49 with household incomes of $75,000-plus.

Conventional wisdom holds that HD spots lead to increased viewer engagement, something advertisers hunger for in the DVR age of commercial-skipping. Sony Chairman and CEO Howard Stringer said at an industry event that there are people “who would rather watch grass grow in HD than tune in to a football game in standard definition.” In that vein, advertisers think compelling ads that take advantage of the superior sound capabilities, pristine picture and wider screen of HD stand a better chance of cutting through the clutter than traditional spots.

Advertisers also want to avoid negatively influencing a viewer with a standard-definition ad. When a person encounters an SD ad while watching a program in HD, it can lead to a quick channel change. The spot can seem like a rude interruption, as it fails to fill the screen and offers a jarring contrast in picture and sound quality. “It’s like raising a flag saying `It’s commercial time,”‘ said Mr. Cuban, chairman and president of HDNet.

Research is still scant regarding the impact of HD ads. But IAG Research, the influential firm that gauges advertising effectiveness, plans to embark on a comprehensive study.

Another unknown that could change the game is Nielsen ratings. So far, the HD-only networks are too small to generate ratings, and larger networks that simulcast programming in HD (such as “SportsCenter” on ESPN and ESPN HD) can’t give advertisers a breakdown on how many people are watching the HD feed.

But Nielsen is expected to begin offering separate ratings for the HD stream next year. Details on who’s watching could give advertisers the information needed to decide whether to produce a spot in HD.

Those figures could also give networks ammunition to convince marketers to go that route. And their pitch could become louder once Nielsen begins to release commercial ratings, a hot-button issue between advertisers and networks.

Advertisers want to buy spots based on ratings for the commercial breaks, not on what happens during the program. Some network executives, however, feel that leaves them vulnerable because lackluster ads can send viewers away-which would lower the commercial ratings and ultimately network revenues. Ads in standard definition viewed on HD channels, they believe, could lead to that kind of viewer defection.

Careful not to stoke the flames on the topic, NBC Universal research head Alan Wurtzel said, “That’s been the argument.”

He added: “It’s just common sense. Why wouldn’t you want a consistent level of quality?”