TORONTO – While cable companies in Canada will have to convince the Regulator first, the changing experience Stateside when it comes to video on demand shows the platform is growing beyond its premium movie transactional business model into an ad-supported, free-to-consumer channel as well.
In a two-hour session put together last week for Rogers employees, the company’s programming partners and CTAM Canada members, Rogers Cable vice-president, television, David Purdy outlined some of the successes his company has had in the VOD space, from the TMN SVOD model where 50% of TMN viewing by Rogers customers is now done on demand to the five million unique orders for MTV content via Rogers’ VOD servers.
What’s unfortunate with the free VOD model for MTV and Rogers is "that there is no ad dollars or transactional dollars from that," said Purdy. "It’s a tragedy."
In Canada now though, there are tight restrictions surrounding ads within on demand streams. Basically, they had to have been aired someplace already with their attached TV show – so they’re not allowed to change once there.
Plus, getting cablecos and broadcasters to agree on certain things, like revenue splitting and testing a new branch of an existing business model, isn’t easy.
That left Rogers, for example, showing last season’s Survivor without any ads at all, partly because of our VOD regulations (but mostly because it and CanWest Global, owner of the linear rights to the CBS show, couldn’t come to an agreement). Purdy called the company’s Survivor On Demand "a modest success."
Broadcasters must push past their fears that cable wants to wreck their businesses with all this on demand stuff, said Purdy, because it’s not true. "We are not interested in disrupting the value chain," he said. "We want to add value to all three parties (content creators, broadcasters and cable)."
Building on the existing relationships Rogers has with its customers, the company wants to better monetize the VOD platform – to the benefit of it as well as to Canadian broadcasters, Purdy told the many broadcasters in the audience.
He outlined three issues that have to be addressed to take full advantage of VOD in Canada: Leaping the regulatory hurdles in front of on demand advertising; using dynamic ad insertion so that ads in the on demand stream are always fresh; and providing better data back to broadcasters on what’s working, and what isn’t.
Because when it comes right down to it, video on demand is a rapidly growing platform filled with unused potential, that much was demonstrated by Terri Schwartz, director of advanced advertising at VOD server and software supplier Seachange, who also spoke at the event.
Right now there are 30 million VOD households in the U.S. and predictions are that there will be 60 million by 2010, she said. The average American user watches 30 on demand hours per month. And while three-quarters of the VOD streams are free, ad-supported streams, a total of 33% of VOD time is free (meaning that paid movies are longer than half-hour free TV shows). Either way, free VOD is a big, growing segment in the U.S.
Rogers customers, on the other hand, call up 8 million streams per month, but just 25% are free, meaning the typical U.S. household watches 10 times more free VOD than a Canadian household. And it’s not because Americans are cheaper, it’s that more and more television content is available from American broadcasters Stateside, and its often ad-supported.
Generally, said Schwartz, there are three ads per VOD stream played in the U.S. Using Rogers as her example, its VOD capable customers (1.2 million) watch 0.05 free streams of VOD per day. That alone works out to 180,000 new ad inserts per day, just on Rogers’ limited free VOD content.
Certain U.S. cable companies have created virtual VOD channels centred around cars, or real estate or lifestyle programming and sell ads to local advertisers whose ads air pre- and post-shows. Some of the ads are produced into the content shipped to the cable operators. Some is stitched in prior to ingest. Each has its limitations, but VOD advertising is growing in popularity.
The coolest – and potentially most lucrative – option is dynamic ad insertion (DAI) where on demand TV content automatically displays the latest of a company’s ad campaign, instead of a stale ad produced months ago, inside VOD streams. Different ads from the same company inside the same piece of content can even be tailored to demographics of certain regions so different people watching the same show see different ads.
Or, some avails can be sold to multiple advertisers looking to reach different demos who view the same content.
While Schwartz demonstrated her company’s Smooth Splicing technology, others, such as from Invidi, are also top-of-mind among operators in the DAI segment.
VOD advertising even without DAI is proving to be a fast-growing segment in the U.S. Some broadcasters are selling out of their VOD inventory six to nine months in advance because the format is uncluttered (three spots per half-hour) and it’s targeted (and targeting is why Internet advertising is growing so quickly).
If DAI is deployed successfully and detailed audience measurement is possible, Schwartz said an ad agency rep told her that broadcasters could request rates up to 50% higher than rate card for VOD spots.
This fall, Seachange will be part of a market trial of DAI and developing VOD technology in Orange Country with Cox and ABC where the network’s top-rated shows will be available on demand, but with the customers’ fast-forward button disabled, so customers will have to view the ads, whose inventory will grow from pre- and post-roll to adding a mid-show slot, too.
Of course, in Canada, as usual, regulations prevent much of this, so look for petitions to the Commission soon on the matter. And while any cable-led petition for more advertising sales flexibility reflexively frightens Canadian broadcasters, Purdy had a message for those broadcasters – which was delivered to him by his company’s founder, Ted Rogers: "They’re selling the goddamn ads – get that through your head," Purdy recalled Ted telling him.
Plus, when Rogers gains control of the Citytvs, the cable division will surely be adding as much broadcast content from its own new stations as it can, meaning other Canadian broadcasters will have to offer up some content, too, in order to remain competitive on the VOD platform. That means multiplatform content deals like the one announced last week by CTV are sure to grow in number and gain in importance.
And finally, whatever the fears broadcasters have of cable company motives, yesterday’s Statscan report about the plummeting profitability of Canadian broadcasters probably scares them more, so look for more co-operation on the VOD file between the two.
