Forget your antennas; you're local content providers first, advises researchers
Sep 25, 2007 12:04 PM
IPTV Update: What new potential advertising and branding models are there for, in your words, “leveraging platforms with hardwired branding all the way down to the semiconductor level”? What does that mean and how can traditional media companies, such as broadcasters, take advantage of it?
Rick Sizemore: In basic terms, the brand “owns” the electronic equipment as the branding will be embedded in the device at the semiconductor level. The brand is integrated into silicon so that no matter what the device is doing, it will synchronize current brand information, logos, giveaways, etc. It’s not just your favorite sports team colors and banners; the device keeps the platform connected with the brand via whatever network it is connect.
The brand can then provide subsidies on the product or the services provided by the product so as to provide benefit to the consumer. Having the device integrated at the chip level results in the brand being permanently embedded in the device, guaranteeing the investment and the ROI for the brand.
IPTV Update: You forecast that by 2011, Internet TV, IPTV and mobile TV will combine to make-up almost 20 percent of media advertising dollars from a 3 percent level today. How important is viewer interactivity to this projection becoming reality and what forms of interactivity are most likely to be successful?
Frank Dickson: Interactivity is not a major factor in this forecast. We see interactivity as showing incredible promise, but it is a feature that we see being implemented in the 2010 to 2020.
The issue is not the technology; the issue is implementing systems, both hardware and software, to make it a reality. The business models will need to be better defined as well so as to properly define how all parties are compensated. Dynamic VOD advertising insertion at a local level has a much simpler implementation and easier defined business model, and it looks like we are still two to three years away for significant deployment.
It is important to note that trials are already happening. Cox Communications in Arizona is now offering local merchants interactive fields that are engaged with the remote control. You select “A,” and it takes you to an upper channel, and you can watch a five-minute commercial. An IP-enabled set-top box would allow for a more elegant and feature-rich implementation.
IPTV Update: Put yourself in the shoes of a local television station manager. Internet TV is threatening your traditional relationship with your network; 20 percent of the advertising revenue pie may be going elsewhere, and you have limited resources but several new distribution alternatives you could pursue. How do you proceed to position your station for sustained revenue growth?
Frank Dickson: The picture looks very gloomy for the local televisions stations, right? After all, Internet TV promises to create a distribution path directly to the consumer, usurping your relationship with the audience. The local broadcaster has to be doomed.
The reality is much different. Local broadcasters do not view themselves as “broadcasters.” They view themselves as local content providers. The difference is quite significant. A “broadcaster” is wedded to an over-the-air broadcast medium. A local content provider is looking to provide local entertainment and news programming to its constituency, agnostic of the distribution medium. Whether the recipient is receiving programming over the air, cable, satellite, IPTV or Internet is irrelevant.
The majority of the value-add created by a local content provider — notice that we killed the term broadcaster — is in providing news, sports and weather coverage for the local constituency. As Internet TV grows, it does not threaten the value of this content. Internet TV becomes another medium for distribution.
Internet TV as another medium of distribution is a very significant point that deserves to be restated. The reason is that it creates another way to reach a local audience.
Typically, local content is viewed from home, after the work day is complete. As a result, we have a lull in the consumption of the content. Since local content is heavily time-dependent, it has a very short consumption window or the content spoils. The Internet and Internet TV provide a conduit for reaching the audience during the work day to catch-up on the weather forecast, the update for the nightly basketball game or the latest weather. As a result, Internet TV and the Internet are a boom for local content providers.
In the longer term, the dominance of the pay-TV distribution and Internet-based distribution begs the question of the relevancy of the broadcast tower. Pay TV penetration ranges 85 percent to 95 percent in many markets. With Internet TV adding to the reach, the need to incur significant expense to maintain a reach to what is becoming a marginal demographic comes into question. The relevancy of broadcast towers is only a lightly discussed topic currently. It will become much more significant after the analog-to-digital conversion in 2009.
Editor’s note: To learn more about MultiMedia Intelligence’s new report, “Advertising & Technology Collide: Semiconductor Companies, Technology Providers, Media Companies and Ad Agencies Partner to Move from Disruption to Monetization,” visit: www.multimediaintelligence.com.
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