VOD Ad Market Flexing; Sony Going Over-The-Top

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November 21, 2011 – 12:03 am

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VOD Ad Market Flexes Its Muscles

About a decade ago, TV advertising professionals were planning their funerals as the rise of video-on-demand appeared as a slow-moving, yet invincible giant that would one day trample them under foot. But instead of lying down and dying, the industry found ways of embracing the complicated, non-linear form of media consumption and has gradually begun figuring out how to buy and sell media against VOD.

To be sure, TubeMogul, as a real-time media buying platform for video advertising, has an inherent bias in letting it be known that VOD ads are becoming a real business. With that in mind, the company does have some interesting stats about rising pricing of VOD ads.

Taking a sample of 29.34 million pre-roll ad streams in the U.S., TubeMogul looked at average CPMs for comScore top 100 Video Metrix publishers, such as YouTube, and found that collectively, October video prices were $10.08, up 5.1 percent from August's average of $9.59 but down a few cents from September's average $10.12. (See TubeMogul's blog post.)

It's hard to tell what the month-to-month fluctuations mean. For example, the weak economy could be working both in favor and against VOD ads. In the short-term, there could be some general pullback from marketers watching and waiting to see what sort of direction the economy is taking, as most budgets that are being activated now were planned months ago, during the height of Congressional impasse over raising the debt ceiling (and lo and behold, the Capitol appears to be heading for another breakdown this week over the budget) and the rising fears about a worsening European debt crisis.

Ultimately, the uncertainty over the macro economy should accelerate the shift into VOD ads and higher spending, as the promise of real-time technologies and greater return on investment for marketers will only be in greater demand.

Apart from the evolution in marketers' and agencies' thinking, it also appears that viewers are becoming a little more accepting of VOD ads, at least in the interest of keeping content available at no additional charge.

A study from the Advanced Advertising Media Project indicated that the size of the ad load had no impact on viewer engagement with VOD, writes CED Magazine's Mike Robuck. The study, which was based on date from a range of ad and TV industry heavyweights such as 4A's, A&E Television Networks, ABC, AMC Networks, BlackArrow, CBS, Comcast, CTAM, Digitas, Discovery Communications, Horizon Media, Intel, NBCU and NDS, found that "aided recall" of the VOD ads was statistically the same between light commercial pods and heavy loaded ones.

With video advertising and TV advertising still rising nicely even in this volatile economy, and viewers squeezed for cash while their media consumption rises, the various data the last few months continues to show that it all has a silver lining for TV ads.

The only problem that remains to be solved: creating a standard for TV ad audience measurement that advertisers, agencies, and programmers can all agree on. But as more money pours into the VOD space, better measurements will naturally materialize.

Sony's OTT Overture

For all the talk of cord-cutting, the fact of the matter is that there aren't a lot of good alternatives to watching cable. Connected TV sales are rising, though, but one can't help but wonder how many consumers use the widgets compared to how many ignore the web-based aspects of their TV and watch cable as they normally do.

Sony, the maker of Bravia TVs that come enabled with wi-fi and widgets for Hulu Plus, Netflix, YouTube and many more less popular options, realizes that consumers probably have a little buyers' remorse after unpacking their Bravia set. (Have you ever typed a YouTube search on to your connected set? It's a maddening, time-consuming experience, to say the least.)

Surely, that must have been one factor on Sony executives minds when it decided to explore an Internet-based alternative to cable-TV service, according to the WSJ's Sam Schechner, who cited unnamed sources.

The electronics maker has reached out to "several big media companies" to negotiate the rights to offer their TV channels via the web and across Sony products such as PlayStation gaming consoles, connected TVs and Blu-ray players.

Although challenging MSOs like Comcast, Time Warner Cable and Cablevision sounds like folly, Sony devices do have the kinds of presence in people's homes that would make it an instant After all, as NPD data shows, there are over 18 million Playstation gaming consoles in use in the U.S. today. For the sake of comparison, Comcast, has about 22.4 million video subscribers.

Interestingly, Sony has supposedly been talking to Comcast's NBC Universal, Discovery Communications, and News Corp.

Aside from that fact that NBCU's parent is the largest cable provider, a deal with those programmers would be tough to garner. Just ask Google TV, which has faltered for, among other things, a lack of content valuable to consumers.

As the WSJ's Schechner notes, Sony want to cobble together some sort of a la carte service. After all, consumers' desire for VOD is predicated on now having to pay for all sorts of channels they don't want. But cable billing systems are based on offering a wide array of channels that are largely subsidized by larger programmers, such as HBO, CNN, Starz. Do these programmers want to upset the cable system applecart, so to speak?

Not right now. But as over-the-top viewing builds an audience, programmers will be reevaluating the current dynamic with MSOs.

Boxed In – Or Out?

In the meantime, established OTT players like Boxee are continuing to try to find ways of encouraging users to cut the cable cord. In a blog post promoting its latest device, a $49 USB "stick" called Boxee Live TV that can provide over-the-air broadcasts, the company's co-founder and CEO Avner Ronen writes, "Cable companies keep telling the press and investors that ‘cord cutting' is not real, and that if it exists then it's limited to people who can no longer afford cable. We are sure they are conducting objective and unbiased research, but we are meeting more and more ‘cord never getters' and ‘cord cutters' every day."

Naturally, that view has its skeptics. After all, by most measures, broadband only households are in the low single digits as a percentage of American homes.

One of the doubters is SplatF's Dan Frommer, who nevertheless considers Boxee favorably. "I don't know anyone who is going to cancel cable or satellite service because they can suddenly watch four broadcast channels on a set-top box they probably haven't purchased," Frommer writes. "It might be a nice add-on for the existing Boxee Box fan base, but this is not going to cause any widespread grief to the cable companies."

Still, it's worth looking at Boxee's Live TV tool as yet another small step in making cord-cutting more enticing. And with apologies to Ronen, most analysts, such as Bernstein's Craig Moffett, has often shown that it is economics, not the sudden interest in cool startups like Boxee or Roku, that have been slashing the numbers of cable subscribers. Boxee does represent a good, though vastly imperfect, option to cable TV. But if you've got to have your live sports via ESPN, Boxee and its peers are not for you. But if you're a casual TV watcher and you like having local TV, and your personal income has become attenuated, then this might get you to take a break from the cable service. And over the long-term, as more programming becomes available through the internet, you just might be part of a larger group of consumers instead of a tiny minority.

But Wait. There's More!


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November 21, 2011 – 12:03 am

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