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 US-based Steve Maloney examines the three main interactive technologies – interactive television (iTV), broadband internet, and mobile commerce (M-commerce) – that are creating opportunities for multiple service operators (MSOs) and challenges for advertisers. He also puts the spotlight on a new development on the horizon – IPTV – that could very well propel interactive programming into the mainstream.
Advances made in digital technology are causing programmers and advertisers in the US to re-engineer their approach for reaching consumers. Cable viewers now control not only what they want to watch but also, when. No longer corralled in front of the electronic hearth as in days gone by, potential customers can be found not only in front of TV screens but also seated before a computer monitor perusing the internet or strolling the beach downloading video to their mobile/cell phones. All made possible by transforming information into the lowest common denominator of ones and zeros – digital technology. Interactive Television (iTV) A broad definition of iTV is any broadcast that allows a user to do something other than watch. The promise of iTV has been heralded for nearly two decades as the next advertising frontier. ITV-driven advertising, embraced in the UK where BSkyB has run roughly 600 campaigns over the past six years, has yet to take hold in the US. But, iTV in the US shows signs of gaining renewed attention from advertisers eager to refine their messages to increasingly targeted audiences.
This development stems from advances made in digital technology – particularly digital video recorders (DVR) and video on demand (VOD) – that has caused a change in viewing habits. The feature that advertisers are most concerned with regarding DVR technology is that the device allows users to easily skip commercials by fast-forwarding through them. In fact, a Forrester Research survey revealed that over 50% of all DVR users said that being able to fast-forward through commercials was their favourite feature. Studies indicate that 8% of US homes have DVR. This number is expected to grow to 39% by 2010.
US cable and satellite operators are seeing increased interest in their VOD offerings. In 2005, Comcast delivered 1.4bn VOD programs to its digital subscriber base. Studies have found that the VOD skews to a younger audience, as 18-34 year-olds comprised 37% of all VOD minutes, and children 2-11 accounted for 19%.
Sports-related content proved popular with subscribers as evidenced by these recent developments in interactivity and sport:
· Reebok recently tested interactive advertising spots in the Philadelphia area featuring the NBA’s Allen Iverson, a Reebok endorser. Reebok ran a personalised television experience on Comcast Cable in the Philadelphia market where behind-the-scenes footage of Allen Iverson’s ‘I Am What I Am’ ad was the most viewed content Comcast’s ON DEMAND service offered during the four months it was available. Plans are underway for Reebok to host a series of branded VOD segments that can be viewed anytime by fans of the brand and its endorsees.
· Following the conclusion of this year’s Super Bowl, Comcast Digital Cable customers could watch NFL Network's Super Bowl XL Commercials, a special showing selected ads in an uninterrupted format initially seen during ABC's broadcast of Super Bowl XL. The special programme – ‘Super Bowl of Advertising’ - available on Comcast's ON DEMAND service and on NFL Network - gave viewers more options than ever to view the commercials they may have missed, or just want to see again, from Super Bowl XL.
· NBC teamed up with satellite operators DirecTV and EchoStar’s DISH Network to offer interactive and On Demand features during the recently completed Winter Olympics.
· Time Warner Cable customers in some markets were able to access NBC Olympics NOW interactive applications, produced in partnership with BIAP Systems. Viewers simply pressed ‘select’ when tuned to any of the NBC Olympic Networks to launch an interactive service providing access to information and background facts and statistics. Broadband internet Broadband video content is growing rapidly as more than half of internet households in the US use high-speed connections - over 23m for broadband, and 17m for DSL. Highlighting the trend of increased video content on the web and advertiser’s interest in supporting it, Brightcove, an internet TV startup that helps programmers collect revenue from shows distributed on the web, has attracted backing from investors (over $16m) including AOL and IAC/InterActive Corp.
Currently, this segment of the interactive market is where the lion’s share of interactive ad budgets are focused – total 2005 US revenues from online advertising exceeded $12bn, up from $9.6bn in 2004 - since it offers the best return on investment in the short term. This is a trend on the ascent as it is predicted by many in the advertising industry that traditional advertising vehicles, such as the 30-second spot, will be used to drive more traffic online for long-form content. Greg Stuart, president and CEO of the Interactive Advertising Bureau (IAB) states: “Interactive advertising continues to prove itself as the most cost-effective medium in driving sales and changing consumer attitudes”.
Sab Singh, a sports business consultant with FIND/SVP in New York opines: “I think broadband is the technology that will be best for the sports fan as better streaming capabilities of live and archived events seems to be of greater value right now.” Consistent with this view is the fact that Comcast is streaming live National Hockey League games over the internet to its high-speed Internet customers. Meanwhile, new and existing NBA League Pass Broadband subscribers have access to live video webcasts of up to 40 National Basketball Association regular season games a week on NBA.com at no additional cost.
NBC is also providing Google Video with hundreds of previews, highlights clips that link to the NBCOlympics.com site, as well as highlights for download. Mobile Mobile commerce, or M-commerce, is garnering much attention from marketers and advertisers. Downloadable sports-related content of this nature has broad appeal to a particularly desirable demographic; 18-to-34 year old male sports enthusiasts. Though not as developed as VOD or broadband internet content, some examples of US sports-related content for the mobile market include:
· ESPN Mobile Launched with much fanfare during this years’ Super Bowl. ESPN Mobile is aiming directly at the X-generation – as well as younger – demographic, banking on their thirst for information and their comfort level with using new technology to download a smorgasbord of sports-related content – scores, statistics, standings, and more – directly to their cell phones.
· GoTV’s SportsTracker service provides up to the minute scores, stats, standings and schedules for MLB, NBA, NFL, college football and basketball, auto racing, and golf, available on to subscribers with Java- and BREW-enabled handsets with color screens on the Sprint, Nextel, and Boost Mobile wireless networks.
FIND/SVP’s Singh says: "For the rights holder, the mobile market is the best. Not necessarily for the fan but for the league or team as intense competition between mobile service providers will lead to increased bidding for the rights.” Internet Protocol TV (IPTV) IPTV could generate a groundswell of interest required to move interactive viewing from a novelty to a commonly-found household appliance. Estimates place the number of IPTV subscribers at roughly 2m worldwide, but growth projections over the next five years – though perhaps aggressively optimistic – paint a rosy picture for IPTV’s future. While Western Europe (notably Alcatel and Siemens) and Australia (Telstra) have seen more activity in this space, acquisitions (Cisco’s purchase of set-top box giant Scientific/Atlantic) and alliances (Verizon and Lucent) are forming in the US.
The US will be a more difficult market for IPTV, due to high existing pay-TV penetration, and stiff price and service competition that is likely to come from entrenched operators in the cable and satellite sectors. Industry watchers do not foresee noticeable growth until 2007.
Major fixed carriers are already migrating their networks to accommodate the convergence of voice, video, and high-speed internet – the long anticipated and now emerging ‘triple play’ revolution. US-based operators that are moving their networks to enable IPTV service delivery include SBC and Verizon. Part of the undertaking is driven by fixed carriers need to prepare to compete with mobile carriers whose newer network infrastructure is less burdened by legacy equipment. Conclusion It is unclear when the tipping point will occur that will drive interactive programming into the mainstream of the US market. As technology allows consumers to order individual programmes on DVR’s, mobile devices, and the internet, programmers will soon be forced to abandon outdated concepts of linear ‘channels’ and embrace a VOD strategy. Like the music industry, which was forced to finally allow consumers to buy individual songs instead of an entire album, video providers are letting people buy programmes on demand and watch them on iPods or cell phones anytime they wish.
This also poses a significant challenge for advertisers; how to drive the audience to other sites where long-form product messages (think BowFlex, etc) can be viewed? This is not to suggest a rapid demise of the traditional 30-second ad spot. Rather, it will gradually be eclipsed by more detailed and creative messaging that allow advertisers to extol product features more thoroughly and call viewers to action.
Though the delivery channels are now fragmented among traditional TV, the internet, and, more recently, the mobile market, it is the view of this correspondent that the dominance of TV as the primary message delivery channel will continue. In the future, television’s role will expand to include not only traditional programming and advertising practices but will also become the primary vehicle for driving enhanced advertiser content to other message platforms. Steve Maloney is a freelance writer based in Naples, Florida, USA. Contact him at sfmaloney@mindspring.com
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