Over-The-Top Is Coming To MSOs; Ads For High Definition

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July 25, 2011 – 12:03 am

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Cord-Cut Warnings

When it comes to cord-cutting, we can all agree on this much: only a small amount of individuals have currently severed their cable subscriptions in favor of over-the-top services like Roku, Boxee and Netflix. But ask cable operators and industry observers if OTT is a threat, the answer generally is... maybe. Push further, and everyone says, "Yes, yes, in the future."

Well, a study from SNL Kagan, which has a study about the effect of cord-cutting practically every other week, has this to say: indeed, deliberate cord-cutting is small, but it is a threat to MSOs - right now.

SNL Kagan estimates nearly 4 percent of U.S. households will turn to Internet video in place of subscribing to a multichannel video package by the end of 2011. The report continues, saying, "Though the thin slice of households relying OTT substitution could be dismissed as evidence of a lack of momentum behind cord cutting, the 4.5 million households it represents are not inconsequential, particularly in light of the basic subscriber declines for the cable industry."

Replacement of the cable wire by wireless TV services is the primary cause in the expected declines in traditional cable, DBS and telco video penetration, the researcher says. SNL Kagan estimates multichannel substitution via OTT delivery will rise from 2.5 million households at the end of 2010 to 12.1 million homes by 2015. The OTT substitution estimates account for nearly 10 percent of the occupied homes in the U.S. in the five-year forecast.

MSOs like Time Warner Cable, Cablevision and Comcast, along with programmers like HBO, see the writing on the wall pretty clearly. As such, they’ve pursued the TV Everywhere option that gives current subscribers access to current shows – something that isn’t often available cheaply elsewhere (although iTunes is selling a season pass for MTV’s Jersey Shore for $19.99 – a bargain, if you’re into that guilty pleasure.) The point being that cable companies are trying to make sure they provide all the usual programming smorgasbord, along with easy online access.

But the question is whether, after 20 years of people complaining about 500 channels and nothing on, will the cable industry’s blandishments be enough to keep viewers from watching exactly what they want, when they want. The easy answer is that live sports will keep the model largely intact. Still, at a certain point, pay-per-view will become more of a mainstream activity for online fans. That represents an opportunity for the Netflixes of the world, who at the moment have little quality content available for on-demand streaming. Still, considering the limited entertainment choices for OTT services, that space may look small now, especially with cable looking much more dominant than broadcast or other mediums. But the newspaper and record business each flew high in the years after the dot-com crash, but that situation turned around abruptly. Unless cable companies figure out how to meet the OTT providers head on, the currently powerful multichannel industry could find itself looking back at this time as when things started going wrong.

HD Ads Jump

The economy may be still be in the doldrums and the brinksmanship in Washington over the debt ceiling isn’t helping either. And yet, digital advertising is still so new and vibrant, that it can cheer the most bearish forecaster.

That certainly appears true in when it comes to High-Def advertising. By the end of the second quarter, there was a 50 percent gain in HD ad distribution over the prior six months, according to Extreme Reach’s Q2 trend report (read the pdf here).

A year ago, HD ads made up about 10 percent of all TV ads distributed by advertisers to broadcast and cable media outlets. Today, that number has doubled to about 20 percent. The increase over the last two quarters is particularly significant because growth in HD advertising was much slower in 2010.

The most significant hurdles to HD adoption (cost, coverage and complexity) are being reduced by recent industry shifts. For one thing, more efficient, cloud-based distribution capabilities are making it easier to serve ads and the coverage of HD media outlets has increased significantly in local markets.

Like over-the-top systems, HD advertising is still relatively small compared to the general TV ad universe. But the technology is pushing the boundaries and marketers are starting to explore ways of taking advantage. Ad categories like technology and entertainment are natural fits for the more dynamic quality of HD ads, meaning that when we talk about HD advertising, we really mean another form of national advertising. But as the report says, the cost-barriers and other hurdles are coming down and local is where the growth are.

Data Everywhere

Since TV sets were introduced to the average home in the 1950s, marketer and programmers have been struggling to answer one question: who’s watching what and how do we aim advertising at them. That process has gotten easier over the years, as analytics companies have offered various ways of counting eyeballs and measuring influence.

NewTeeVee’s Ryan Lawler profiles one of the latest companies promising to solve the viewing-advertising question, the clearly named What’s Watched. The company collects data from social media and mobile apps detailing viewers’ activity. It then packages that info for demo targeting with the promise that this data can help companies figure out how to drive higher ratings and smarter ad placements.

One of the most obvious trends these days, at time when consumers are both more open about sharing their interests and entertainment choices (even as they recoil at "privacy violations"), is using data to target the social graph. The idea is that you can target programming and ads at people who appear like-minded from according to their social networking habits.

While it’s up for grabs whether or not What’s Watched can move the ball forward, the emergence of these kinds of startups seems to validate recent moves like Dave Morgan’s expansion of Simulmedia from a TV promotions specialist to one that tries to improve the placement of ads. But there are already companies with a head start like Bluefin Labs,TRA Global, Invision and MediaBank which have already forged tight connections with ad agencies by bringing online media buying values and methods to the TV. Still, What’s Watched’s more mobile and social emphasis suggest that there are cracks and crevices in the “targeted TV” space that still need filling.

Amazon Vs. Netflix

Two weeks ago, Netflix shocked many subscribers by splitting its streaming and DVD rentals into two separate pricing plans, making it more than double the cost to access both. The action was taken, in part, because Netflix calculated that it didn’t have much competition for its services. But that calculation could be changing, as Amazon Prime Instant Video streaming service suddenly has appeal as an alternative, thanks to a deal it struck with CBS last week.

The deal adds 2,000 episodes of 18 CBS shows, including "Medium" and "Numb3rs,” to Amazon Prime, the e-tailer’s premium shipping program, according to a WSJ report by Stu Woo And Lauren A.E. Schuker. Although non-exclusive, the pact is similar to the one CBS made with Netflix earlier this year. In a statement, CBS Chief Executive Leslie Moonves said the agreement "represents another meaningful way for us to realize incremental value for CBS's content."

Currently, Amazon Prime Instant Video includes more than 6,000 movies and TV shows. The CBS content will boost it by roughly 33 percent to 8,000 when it’s added later this summer, writes paidContent's Staci D. Kramer.

At first blush, Netflix doesn’t appear to have much to worry about, since Amazon Prime Instant is limited to PC, Mac and connected TV. And though it’s compatible with more than 300 devices, oddly, none are mobile or portable. As Kramer says, that gives Netflix the Apple advantage hands down -- if you want streaming video on your iPad or iPhone, Netflix is the better choice.

That is, until Amazon gets around to unveiling at least one tablet and possibly more in coming months. You can certainly fault Amazon for moving to slowly, but streaming video is still only just starting to gain traction. From the locks of it, Amazon is likely to strike more high profile content deals like the CBS one and then, go to market with something much more robust, just as more consumers will be ready to compare and contrast streaming services.

But Wait. There’s More!


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July 25, 2011 – 12:03 am
  1. One Response to “Over-The-Top Is Coming To MSOs; Ads For High Definition”

  2. Cord cutting was not the answer for me I got all my TV channels that I get at home to my Galaxy tablet and my DVR recordings as well. DISH Network had me down load there free app called DISH Remote Access that allows me to use my mobile device as a remote control and manage my DVR conflicts with ease. Working for DISH Network I can tell you that they use sling technology to bring there customers TV everywhere and they sell the adapter for $99 and you can get a free one thanks to their new promotion. Check this link out http://bit.ly/mMi9hU.

    [Reply]

    By Nathaniel Richmond on Aug 9, 2011

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