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Ads On-Demand

Cable operators seek to monetize free VOD 7/22/2005 08:00:00 PM Eastern

There is no denying the growth of free VOD. In recent weeks, Turner has
laid out plans for TNT and TBS to begin offering free video-on-demand, and the
Speed Channel says it will soon add all-original NASCAR content each
Monday.

But as any operator knows, “free” content is anything but.
Capacity needs to be added to VOD servers for storage, and additional streams
need to be added to the system to meet increased subscriber demand. The
networks also face costs: first, in getting the content ready for VOD; then, in
negotiating the rights to distribute the program on VOD. TNT, for example, will
roll out its VOD service without offering The
Closer
, its biggest hit of the season, because it was unable to
reach an agreement with program producers.

As those networks join CNN, Comedy Central and multiple Scripps networks
in allowing subscribers to access free programming with a few clicks of the
remote, everyone is wondering how to make money on free VOD. The answer, for
many, is advertising—particularly new ad models featuring highly
personal and, cable operators hope, highly effective ways of reaching viewers.

“All MSOs understand that free VOD has to be paid for by
someone,” says Paul Woidke, VP, technology, for Comcast’s
Spotlight advertising division. “And part of the way to do that is with
advertising that is relevant to the viewer.”

Targeting ads

Several major operators are working with the simplest form of VOD
advertising: placing long-form advertisements (think, high-end infomercials) on
the VOD servers. But that only hints at the potential. Comcast, for one, is
working on taking a program that aired on regular TV, pulling out old
commercials, and adding in new ones for the VOD version. By 2006, the company
expects to use the digital cable network to swap spots into and out of VOD
programs based on who’s watching.

“If you’re watching a fishing program, you could get an ad
for a new rod and reel,” says Joe Ambeault, director of broadband
services for VOD-technology provider SeaChange. “The VOD system has
software that manages a dynamic play list with business rules attached to each
piece of advertising and content.” That list figures out which ad is
most appropriate to pull off the VOD server, he adds, and
“splice” into the VOD stream sent to the viewer.

Yet there is still work to be done. Some of the issues that remain
involve setting standards for splicing so that all the vendors use the same
method to signal the VOD system to insert a spot.

Until then, some operators are using digital-cable pipes to do the
next-best thing with live local-cable inserts. Comcast is dividing several
major markets into 40 different advertising zones and using C-Cor’s
server and SkyVision software to send out different local spots to each one.
The system in Philadelphia has 1,600 regular and 75 HD TV streams available,
making it possible to send out zoned versions of networks like CNN and ESPN to
as many as 40 markets at a time.

Until the next-generation VOD ad system is perfected, many operators
will take a wait-and-see approach regarding splicing VOD advertisements.
Ambeault faults an advertising community stuck on outdated models.
“Advertising is always about crawl, walk, run,” he says.
“The reality is that the technology can sometimes exist for as much as a
decade before it gets used.”

VOD ASAP

That change in attitude could begin to dramatically in January, when
Nielsen adds VOD and DVR viewership to its numbers. It will offer three forms
of audience measurement: live, live plus 24 hours (for DVR time- shifters) and
live plus one week (which will include both DVR and VOD viewing). Given that
the last number will be larger than the first two, odds are that almost every
content producer and network will want its program on VOD as soon as
possible—and advertisers will finally have hard data on viewership.

Coleman Breland, Turner Networks executive executive VP, sales and
marketing, sees that sparking the advertising community into action:
“[Viewer measurement] will definitely impact the model.”

He and others believe that the impact of VOD advertising will be
significant. “When we see trials of VOD ad insertion in 2006,”
says Woidke, “it could signal the most massive change you could imagine
in the TV-ad business.”

September
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