Looking Behind Netflix Streaming Decision; Kantar Wants The Video Out Of Display

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July 18, 2011 – 12:03 am

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Netflix Streaming Setback

It’s never a dull week for Netflix: the company has decided to shift gears and announced it would separate subscription options for unlimited streaming and DVD rentals. Unlimited online streaming remains at $7.99, while the DVD-only monthly subscription runs from $7.99 (one per mailing) to $11.99 (two per mailing). But if you can’t decide between streaming or mailing, you’ll have to pay more than double: $15.98.

The change was a bit of shock. Sure, Netflix has been dealing with more onerous studio licensing terms for its streams – n.b.: the renewal of the NBC Universal streaming deal does not allow next-day streaming for shows like Saturday Night Live; for that, you’ll have to rely on Hulu. But the company was considered one of the primary over-the-top services and potential challenger to pay-TV (though CEO Reed Hastings often discouraged such talk, for obvious competitive reasons, given the interdependence of studios and cable).

In a blog post, Netflix explained the sudden change in pricing plans by saying it was caught off guard by how many consumers still want DVDs. As such, the costs of maintaining a streaming and mail-based rental business were not reflective of the current subscription models.

In other words, streaming may be the future – and Netflix, with its large library, may still dominate – but DVDs are not disappearing from its business model for a longer while than anticipated. With such stark choice, it’s likely that users will opt for the DVD plan, as the amount of new box office hits will tend to be made available in physical form first. Unless Netflix can get creative in its talks with the studios – and in turn, the studios do an about-face and embrace streaming over DVDs (both are highly unlikely) --  Neflix’s next steps will surely be small ones. Especially when it comes to its streaming strategy, which will almost certainly take a hit from consumers, at least in the short term.

TV’s Smelling Smarter

And it’s also going to smell better, according to an analyst note from Bernstein Research (sub. req.). We’re all aware of the possibilities that better, goggle-less 3D TV and HD presents, as well as the integration of the Internet into the TV screen presents. But Bernstein is so optimistic, it even thinks that despite the technical hurdles, smell-o-vision could become a part of future TV watching, offering a wider array of possibilities for advertisers.

Although regarded as little more than a joke since falling flat as a movie theater gimmick meant to blunt the rise of TV in the 1950s, manufacturers like Samsung are picking up the mantle and have actually been testing a prototype of TV that touches the olfactory sense. “Computer gamers are growing used to controllers or even chairs that vibrate in relation to the on-screen action. Similar technology could add another level of realism to TV viewing,” write analysts Claudio Aspesi and Anthony Sleeman.

But in terms of who will win the battle for the connected home, Bernstein is betting on the established players. It all comes down to who owns the rights to premium content, especially live sports, which is one of the biggest influencers of what consumers will pay for. Years ago, for example, HDTV sales were tied to the Super Bowl, knowing that being the first to see the game in a whole new light – literally – would loosen consumers’ wallets.

All these innovations will demand heavy investment by established companies within the industry. But if those revenues are threatened by upstarts – particularly Apple and Google – manufacturers and cable companies may find themselves retrenching. This will all play out over the next five years and we’ll see of touch-screen TVs and even scent-based sets can move the living room set forward a lot or just a little.

Remove ‘Video’ From ‘Display’

Sure, Kantar Video CEO Bill Lederer has some natural reasons for wanting promote “video” as a distinct category instead of seeing it lumped in as a sub-category of online display or TV. But Lederer, writing in AdAge, also has a good argument – though it will likely be more relevant five years from now, if not today.

The WPP research unit projects that by 2015, ad spending on “video” will reach $5 billion, surpassing the directory industry and challenging the aggregate size of annual outdoor ad spend. And in the next decade, video as an ad medium will have gone from near zero to one of the top six ad mediums. In five more years, video advertising will likely enter the top five, if not top four.

Yes, video is the fastest growing medium within display, along with social media. But its roughly $1.5 billion take last year (according to eMarketer) also still fairly small compared to the $26 billion total Internet spending. And it’s hardly a drop compared to the $65 billion spent on TV.

But size doesn’t necessarily matter in terms of distinction. After all mobile is projected to hit $1 billion for the first time by the end of this year and it has its own marketing association to promote it. Lederer reasons that because video lacks a high-profile, sustained, advocate at the agencies and brands, the value of a video as its own special category is being lost. After all, to viewers of Hulu and YouTube on their connected TVs or cable TV iPad apps, it’s all the same programming right? If consumers are seeing the lines blurred between what they watch on their TVs, PCs, tablets and phone, maybe it’s time the agencies and marketers do too?

Steering Canoe

This summer, when Canoe Ventures loses its first CEO, the interactive advertising joint venture of the major MSOs, among the first goals of the company will be to refine its brand identity.

As paidContent’s David Kaplan reported, David Verklin, the media buying veteran who was tapped to lead Canoe three years ago, is stepping down this summer and will be replaced by COO Kathy Trimko, at least on an interim basis (though she may ultimately be given the job permanently. It hasn’t been decided yet.)

Initially, Canoe was formed in March 2008 to spearhead nationally targeted TV ad sales through the set-top box. But as the limitations of dealing with varying technologies across the country’s regions proved difficult to align, Canoe moved into other areas, particularly the area of ad insertions for interactive TV and VOD ads.

Verklin was brought in as Congress was beginning its scrutiny of targeted advertising by cable companies in their role as Internet Service Providers. His diplomatic touch certainly helped to diminish the focus on cable, while bringing more marketers and agencies to together to take a chance on what is still largely regarded as experimental.

The primary challenge for Trimko - or whomever ultimately takes the job on permanently - is to continue Verklin’s diplomatic work, especially among Canoe’s MSO backers, who have lately been working on their own individual projects, such as “TV Everywhere” iPad apps. While these singular efforts have helped move the ball down the court, in order to make interactive TV advertising – and ultimately, targeted TV (or “addressable TV,” as industry lawyers and marketing execs prefer to call it) a reality, it will need a strong advocate who can win over the skeptics.

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July 18, 2011 – 12:03 am

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