ABC has made it OK for programmers to ask cable operators for what they want in exchange for providing choice VOD content.
Last week at the Cable Show, ABC-Disney made a deal with Cox to offer its four top-rated scripted series for video-on-demand in the Orange County, Calif., market starting this fall in a groundbreaking trial that injects badly needed life into a sagging VOD market.
Under the deal, episodes of “Desperate Housewives,” “Grey’s Anatomy,” “Lost” and “Ugly Betty,” as well as select ESPN on ABC college football events, will be available for Cox Digital customers in the FreeZone section of Cox’s On Demand service. The prime-time series will be available for viewing the day after their broadcast premiere.
However, there’s a catch: For the first time, a cable system will disable the fast-forward option on its VOD service for those shows, preventing consumers from skipping the commercials that provide the financial underpinning for the experiment.
The ABC-Cox project sparked a debate both on the show floor and in sessions at the Cable Show over whether taking back a feature from viewers is wise in an era defined by consumer control thanks to TiVos, DVRs and Internet TV. But dollars are expected to be flat to down for the overall upfront as money migrates online, so programmers, cable operators and technology firms at the show focused on the tools that will help MSOs deploy more advanced advertising options this year in an attempt to reclaim ad dollars. That includes efforts such as the ABC-Cox VOD pact.
The deal sends a message to other networks that cable operators are willing to come to the table and give programmers what they want in exchange for the top-tier content that the viewing venue needs. VOD proponents contend that the absence of such top-flight content has hindered VOD in the last few years.
“It gives us a much higher comfort level that we can move in a direction that disables fast-forward [if we choose] because it allows us to monetize content,” said Bridget Baker, president of TV networks distribution at NBC Universal, during an interview on the show floor. She said NBC does not have any specific plans at the moment to follow in ABC’s footsteps, though she began renewed discussions with cable operators immediately following the news last week. “By saying we have the control to tweak the technology, we perceive that as meeting us halfway.”
Research has also shown that consumers are willing to watch ads on VOD in exchange for getting the content for free, said Paul Rule, president of VOD research firm Marquest Research. “The tolerance level of viewers amazes me. Millions are still sitting through six-minute commercial pods despite the ready availability of DVRs, so who’s to say they won’t snarl a few times, then watch commercials in VOD content with resignation.”
But Cox should be careful, too, he noted. “My first reaction is that this could cause subscriber rage to replace road rage as an outpouring of social unrest, but I could be wrong,” he said.
At a panel discussion at the convention, Chris Pizzurro, VP of digital media sales at Turner Broadcasting, pointed out that Turner has found that VOD viewers fast-forward ads only 15 percent to 20 percent of the time.
ABC has not yet determined how many ads will be included in each commercial break on VOD, but it will likely be fewer than in broadcast pods.
In addition to the VOD advertising debate, technology vendors in the show floor demonstrated new products for cable operators that will enable them to offer interactive and targeted ads to consumers.
For instance, interactive TV content and technology provider Zodiac said it has inked deals with three of the largest cable operators and a satellite provider to roll out interactive ad-supported games starting in July. Zodiac is best known for its work powering Cablevision’s existing interactive gaming service.
Zodiac will embed static ads during the short breaks between levels in its casual games and puzzle games. The company is targeting automakers and casual dining chains to start. “You don’t need interactive TV to do brand advertising,” said Rick Howe, executive VP for marketing and sales at Zodiac. “You can use it to do advertising that takes viewers to a specific place or prompt them to ask for a brochure or to order a pizza, so it’s really taking the model of advertising into a transactional mode.”
Operators are launching such services because they yield incremental revenue, which is necessary now that cable is considered to be fully penetrated among consumers. Zodiac sells the ads and splits the revenue with the operator. Mr. Howe said he expects to earn about $4 million from interactive advertising revenue in 2008, the first full year of deployment.
Cable operators are also keen to offer targeted advertising options to marketers, as Cablevision did in a test that started late last year. While other service providers look to follow suit, technology firms are jostling to introduce the tools to serve the growing demand. Scientific Atlanta demonstrated a new technology that lets cable operators slice up their advertising time within a ZIP Code to various demographics. “You can address smaller and smaller sub-segments of your subscriber population,” said John Morrow, Scientific Atlanta’s VP of strategy, development and execution. “So you could sell the same ad to a local car dealer, a restaurant chain, perhaps, a firm, a local venue. So you get multiple advertisements in the same space.”
That lets cable operators reduce waste in advertising and deliver a more efficient buy. BigBand Networks is another technology provider that offers targeted ads tools for cable operators. In addition to refining their ad delivery capabilities, cable operators are also looking to bring more Web experiences to the television set to take advantage of the current interest in online video programming. Interactive TV provider ICTV struck deals with programmers including CNN, HSN, Fox Reality, AccuWeather, Reuters and others at the show to use the company’s “ActiveVideo” software that migrates its interactive broadband channels onto cable TV in an interactive environment. Grande Communications should launch a trial with those programmers shortly, ICTV said.
“With Apple, Sling, Xbox and all the devices from consumer electronics companies that are enabling a new form of aggregating content that doesn’t involve the cable operator, this provides the artillery they need to win the battle for the last 10 feet,” said Ed Forman, executive VP and chief operating officer at ICTV.
Traditional TV equipment suppliers are adding broadband TV capability to their tool kit to keep pace with the changes in the business. Tandberg Television, for instance, recently launched a broadband business unit so it can offer its network and operator clients the ability to deliver and manage their programming across linear TV, VOD and broadband. “We believe content owners should be able to deliver to any platform and any device, and we as a technology provider need to be able to facilitate that,” said Joe Franzetta, general manager for the company’s broadband TV business unit.
Just deploying advance advertising isn’t enough, though. The cable industry needs to work together to offer a common footprint across their systems to advertisers in order to grow these new business opportunities, said David Porter, VP of marketing and new media at Cox. He said he’s in discussion with other operators about developing some uniformity in interactive ads. “We need some commonality in our technical architecture,” he said.