The High-Water Mark for Interactive Cable

Transcription

1 The High-Water Mark for Interactive Cable Panelists Daniel Taylor Senior Analyst Consumer Research Anette Schaefer Director Consumer Research Copyright Yankee Group Research, Inc. All rights reserved.

2 Agenda Introduction and Definitions Why the US Market? Evolving Audience Behavior Internet video is raising the bar Supply and Demand (Advertisers Perspective) The Role of Network Operators Current revenue Interactive investments Forecasts Global Market Implications Project Canoe Recommendations and Outlook Page 2

3 Introduction Thesis: The ability to deliver digital advertising is make-or-break for the television industry. Background Media companies seeking to capitalize on digital interactivity Network operators Three-screen solutions Increased advertising revenue Key questions How will digital advertising facilitate investments in interactivity? Incremental revenue for whom? Technology availability User uptake and adoption Methodology Interviews Forecast Page 3

4 Interactive TV versus Interactive Advertising Interactive television means many things to many people The universal need for a return path Advertising can be interactive without television and vice versa Flavors of interactive advertising 30-second spots: digitally inserted Targeting In-stream overlays Viewer interaction and telescoping Page 4

5 Below-the-Line Ad Dollars Justify Investments in Interactive Video Platforms Characteristics Ad Frequency Currencies How to Reach Specific Audiences? Ad Format Measure of Performance Above-the-Line Brand Advertising Broadcast television (cable, satellite, terrestrial) On-demand programming (VoD, DVR) Internet video (streaming/download) Individual ads or a cross media campaign shown multiple times to the same viewers Passive measurement of contact and time spent 10-infinite/viewer Cost per thousand (CPM) Media property Geography Day part/time spent, touchpoints 24/7 30-second video clip Reach Size of audience Number of impressions delivered Time spent with the advertising Demographics, targeted audience Below-the-Line Performance- Based Advertising On-demand programming (VoD, DVR) Internet video (streaming/download) 5 impressions/viewer Cost per Click (CPC) Digital ad insertion Targeting Demographic Psychographic Geographic Individual ads shown a limited number of times Measured performance Active measurement of clicks, responses and conversion rates 15- or 30-second video Overlays, bugs, tickers and telescopes Addressability Number of unique users Number of households Conversion rate (number of clicks per impression) Source: Yankee Group, 2008 Page 5

6 Why the US Market? High penetration of pay TV, cable and broadband internet access. Market concentration 300 million people million TV households One regulatory market Strong cable business models Primarily subscription Advanced infrastructures for interactive advertising and television. US programming and infrastructure ownership feed into global market Programming is syndicated globally Infrastructure ownership News Corp owns Sky (UK and Italy) and Starcom (53 countries in Asia-Pacific) Liberty owns cable in 13 EU countries Telemundo assets in Latin America Lessons from other markets, e.g., red button in UK 80.5% of all UK households receive Digital TV, 43% can watch interactive advertising/tv through the red button on their remote control. Interactive ads generated 123 million GBP of revenue in Interactive-capable households generated an average of 7.51 GBP per year in interactive advertising revenue in 2007, which increased 5.8% from Overall TV advertising revenue is billion GBP. Interactive ads account for 3.5% of the market 3.5 million GBP in Ofcom fines for consumer rights breaches associated with the red button in Note: UK 59 million population, 26.7 million households Page 6

7 Evolving Audience Behavior: Media Saturation Talk on the Phone Read Surf the Web Read Magazine Read Newspaper Talk on IM While Watching TV, I also... 69% 65% 62% 42% 38% 32% Advertisers should take notice Audiences are distracted Youth are gravitating toward other media 20% of 13- to 17-year-olds are sending SMS while watching television 76% of 25- to 34-year-olds surf the web and 75% check while watching TV More than two-thirds of all respondents talk on the telephone while watching TV Listen to Radio 16% 0% 10% 20% 30% 40% 50% 60% 70% 80% Percent of Respondents n=1,503 Source: Yankee Group Anywhere Consumer: 2007 US Entertainment Survey Page 7

8 Evolving Audience Behavior: On-Demand Ad Skipping Percent of DVR Owners Frequency of Skipping Commercials 60% 50% 40% 30% 20% 10% 49% 42% 33% 40% 15% % 2% 2% Ad skipping will continue to grow as DVR penetration increases with time DVR ownership increased to 27% of US households, compared to 20% in 2006 Consumer will time-shift their consumption to avoid ads 53% of DVR owners wait to start watching the show to skip the commercials Women are more likely than men to skip advertising 47% of women fast-forward through ads on DVR, compared to 37% of men n=4 01 0% Always Most of the Time Occasionally Source: Yankee Group Anywhere Consumer: 2007 US Entertainment Survey Never Page 8

9 Interactive TV Impact Ad platforms will succeed if they migrate response driven budgets into video, which will increase in volume and price. Source: Yankee Group, 2008 Page 9

10 Internet Video Has Already Changed Advertisers Expectations Benefits: Immediate and rich measurement Transparency of ROI Rapid campaign deployment Pressures on broadcast and cable C3 Ad-supported VoD under fire Challenges: Conflicting budget priorities above and below the line Cross-platform solutions Increased number of ad formats works against standardization Increased cost of targeted and localized campaigns Disruption of advertising value chain KPI, ROI and value Privacy and data ownership Millions of Users US Monthly Internet Video Audience, Ages 2 and Up Source: Yankee Group, 2008 Page 10

11 US Internet Video 2012: Reality Check Broadcast Cable, IPTV and Other Return-Path Solutions Internet Video Number of Viewers Largest Medium Large Reach Percent of TV Households All <50% 75% Number of Minutes Viewed Large Large Medium Digital Ad Insertion, Including Targeting No Yes Yes Ad Interactivity (for More Information) No Yes Yes Capabilities Telescoping Above the Line (ATL) Advertising No No Yes Unknown quantity if users connect televisions to their PCs or the internet. Below the Line (BTL) Advertising Unknown effectiveness the smaller number of households are a liability. Source: Yankee Group, 2008 Page 11

12 Many Variables at Play Programming type: Linear On-demand Interactive Platform: Broadcast On-demand Internet Mobile/portable Ad formats: 30-second video Overlays Targeting and digital insertion Sweet spots: Long form vs. clips Ad-format appropriateness User uptake Source: Yankee Group, 2008 Page 12

13 Who Will Make the Investment in Interactivity? Current discussion: Broadcast vs. cable networks Growing cable audiences Advertising accounts for roughly half of revenue for ad-supported cable Digital and interactive advertising requires a return path Cable MSOs, IPTV and satellite operators must make that investment Will this come from increased subscription fees? Or increased advertising revenue? Pay-as-you go appears to be the plan $5.7 billion in cable local spot Network operators want a piece of the growing cable network ad revenue Will the network operators be able to deliver? US Television Advertising Revenue, 2006 Source: Yankee Group, 2008 Page 13

14 The Interactive Opportunity for US Cable MSOs Source: Yankee Group, 2008 Page 14

15 The Future for Interactive Cable If we focus on the return path: Internet has the best penetration for BTL (targeted) advertising Cable and IPTV will reach less than half of households by 2011 Cable and IPTV advertising revenue growth will come from local and direct marketing budgets US IPTV operators are in the same situation as cable 2 minutes is not enough Need additional inventory Carriage agreements Project Canoe, depending on how it s implemented, can change things for the better Satellite remains a wild card Source: Yankee Group, 2008 Page 15

16 Global Implications for Cable, Satellite and IPTV Traditional interactive TV feature such as VoD, time-shifted TV and personalized content are overpromised, but cable and satellite operators outside the US have failed to deliver with some exceptions In Europe, only 23% of consumers are aware of VoD Cable networks don t offer interactive advertising features and would require further investments in network infrastructure IPTV is more mature in EMEA and Asia-Pacific Service providers have high expectations for advertising revenue from crossplatform media distribution (benchmark PCCW in Hong Kong) Global markets are watching Project Canoe with hope Page 16

17 Project Canoe Great idea Opportunity: Getting it right with on-demand programming New carriage agreements Cross-selling digital inventory in the 17 minutes available on cable networks Sharing the revenue Standardization Recommendations for Project Canoe Start with existing standards Interactive Advertising Bureau (IAB) perhaps? Involve IPTV and satellite Enable the broadcast networks Make it global Design for IPTV and mobile Page 17

18 How Should Cable MSOs Plan for Interactivity? Take the telescope off the table Don t sell what you can t deliver Expand beyond the two minutes with both cable and broadcast networks Dominate on-demand programming Negotiate VoD library rights with content owners Invest in DVR applications to support ad insertion and targeting Standardize Bottom-up instead of top-down Co-opt the internet Develop a privacy plan for subscriber data Page 18

19 Winners and Losers in Interactive Advertising Winners Broadcast networks are platform- and media-neutral and have the best opportunity to leverage all forms of distribution available to them. IPTV operators will be able to hedge their bets, supporting both internet video and cable network advertising standards. Losers Cable MSOs will grow ad revenue and introduce digital capabilities for VoD and DVR on-demand programming. Cable networks are drawing strong audiences today, but their ability to capture interactive audiences in the future is in doubt. Internet programmers will struggle to differentiate themselves. Page 19

20 Recommendations Cable Networks Negotiate internet distribution and leave carriage fees alone Build stronger web properties Design integrated cross-platform product strategies IPTV Operators Support two sets of standards Work with the cable MSOs Broadcast Networks Use the time value of advertising Digital refresh Introduce as many programs online Offer VoD libraries with a revenue split Develop new advertising formats for VoD and DVR Page 20

21 Q&A Page 21

22 2008 Yankee Group Survey Suites Page 22

23 Yankee Group Consulting Services Yankee Group Consulting Game-changing advice for leaders seizing growth in the anywhere-connected world Consulting Capabilities Differentiated services to address growth, business model, market, product and network strategy challenges and opportunities Deep industry content expertise with a unique focus on connectivity topics and closely aligned decision-making frameworks Contact Us We advise clients on their specific business needs, contact us to find out more consultingservices@yankeegroup.com Page 23

24 2008 Yankee Group events More than 13,000 people worldwide participated in thought-provoking events led by Yankee Group last year. Join us at one of these events: ITU Telecom Africa Cairo, Egypt May Mobile Internet World Europe and WiMAX World Europe Munich, Germany May ITU Telecom Asia Bangkok, Thailand September 2-5 WiMAX World USA Chicago, IL, USA September 30 - October 2 Mobile Internet World Boston, MA, USA October Enterprise Executive Summit at NXTCOMM08 Las Vegas, NV, USA June 16 Page 24

25 Thank You Daniel Taylor Senior Analyst, Consumer Research 2008 Webinars Anette Schaefer Director, Consumer Research Mobile Worker Segmentation Openness The Future of Wireless Business Applications 2009 Predictions Securing Mobile Transactions May June July August September October November December For schedules, please visit our web site: Anywhere Network Scorecard Achieving Anywhere Content Delivery Connected Device Business Models Register at or Page 25