A story from Reuters hit the internet this week outlining NBC's forced refund of millions of holiday advertising dollars due to ratings short-falls. In the online video sector this news has been heralded as the first step in the death of television. They might be correct on the demise, but big-box detractors couldn't be more wrong about the future of how we watch content.
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The cable industry is hitting a critical mass with video on demand and it's time for advertisers to take notice. I'm convinced that branded channels with niche focus, all piped directly to your 50" HD Plasma screen is the wave of the future and it's available today. I'm so sure of it that my partners and I started the first nationally available science fiction VOD (video on demand) network, Illusion, with just this belief in mind.
For over two years I've been meticulously devouring metrics on television and internet viewership. I've been comparing, observing and frankly obsessing over the trends both inside the industry and out, all to come to the conclusion that my beautiful new HDTV set is going to be receiving a digital cable (or satellite) signal for at least the next ten years or longer. Back in July Mitch Oscar counted down some of the reasons that advertisers are being slow to jump on VOD at MediaPost's TV Board blog. I'm not convinced that many of the arguments brought up in the article hold a lot of water.
Centered around the areas of penetration, familiarity, usage and long-form content, Oscar's reasoning is solid when coming from the perspective of an advertiser like Pepsi who has a broad appeal, but when taking in to consideration the power of the niche market the entire scheme falls apart. The Ski Channel for example is set to launch in first quarter of 2008 with niche brand advertisers like Mirage Resorts and Fender Guitars. The media buyers behind those brands understand the value in reaching a smaller group of viewers with a much higher potential for conversion.
Another place to add value over both traditional broadcasting and online video is adopting a multi-platform strategy early. At Illusion we like to continue the brand associations across other media by bringing campaign messages from the cable network to our web site, broadband and mobile video properties. In this way media companies like Illusion and Ski Channel can deliver a strong brand message on multiple fronts to a hungry affinity audience.
Another important piece of the VOD puzzle is that viewers watch shows on their own time. When a media buyer books a VOD ad their message is going to be seen on the viewer's schedule, not on the network's. This is a godsend for niche marketers. Where some advertisers are looking at embedded ads as a problem to overcome I see it as a strength. Conventional wisdom tells us that if a campaign isn't working it should be pulled and swapped with something that is. That translates to me as meaning advertisers are used to trying to sift through the sea of eyeballs for the "right" pair. Niche focused embedded ads don't become a curse but a blessing because the right eyes are always going to be seeing the ad in the first place; if you combine this with the principal that repetition builds retention advertisers are imprinting their messages consistently on their market for a full thirty days.
As of right now there are over thirty million homes receiving video on demand service from their cable operators. That's very good penetration if you're looking to court advertisers that might not regularly buy ad space on television. It's that fear of the old television advertising paradigm that might be scaring away the best niche buyers. We, as an industry, have to articulate our message to new advertisers and do a little hand-holding in this learning phase. Online video has been doing an amazing job of getting these first-time media buyers to dip their toes in to video branding and we need to learn from their example. By harnessing the power of time-shifted television and combining it with the other platforms available to us as content aggregators we can offer much more compelling packages than either online video or broadcast.
As for my specific views on why television isn't knocking on death's door it's all about quality and not numbers. Youtube, the gold-standard of online video sites, is mostly seen as just a pirate content engine. I personally only visit it to find obscure clips from long-forgotten television series and movies. If I could order that same content up on my cable box I'd gladly do so. It's the old "lean-in", "lean back" metaphor again. I used to have a television in my bedroom. In the last year or so since I've removed TV from my sleeping area and I find that I sleep much better. This is an analogy for the problem facing online video. Since online video is still tied to the computer I get the subconscious feeling of "work" when I'm trying to watch anything longer than a few minutes. It just doesn't do it for me, and I think the numbers can reflect that it doesn't do it for a lot of people looking for long-form programming online. In my own informal analysis of Illusion's broadband video stats we get a drastic fall-off of "full views" on videos that break the four minute mark. It's going to take a long time for people to get used to watching full-length programming online.
The only exception to this rule is the pre-college age demographic that's causing a huge surge in online viewership. Analysts see this trend as adoption by the next generation, but I'm also not sold on it. I was using my phone to send AOL instant messenger blurbs back in 1997, when I was in fact a teenager. In 1999 I was watching a lot more online video at sites like iFilm and Atom Films. As I got older (and busier) I noticed that I needed ways to simplify my life. Maybe in the end there's going to be room for both types of content-delivery technology, but a good lesson for media buyers to take away from the current market is that they need to know their brand.
Youth brands, mainstream brands and niche brands don't always walk hand-in-hand and it's up to the media buying professional to seek out the best ways to reach the people most likely to take advantage of the products and services they represent. Taking advantage of the emerging multi-platform brands like Ski Channel, Illusion, and Fearnet makes good sense in this time of industry transition. The faster media buyers realize the value behind niche VOD, the faster their messages will reach the right people at the right time. The smart advertisers won't take their money out of TV, they'll just find better places to spend it.