Video On Demand: How to Create an Advertising Marketplace

Video On Demand (VOD), viewed via one’s cable or satellite box, is a rapidly growing medium, particularly for programming from broadcast and cable networks called Free On Demand or FOD for short. Rentrak is the industry’s source for FOD information. For YTD 2013, there were more than 9 billion total VOD viewing occasions (e.g. clicking the button to watch VOD) and 78 percent of those were for FOD. While VOD in total grew 30 percent between 2009 and 2013, FOD grew by 70 percent. Rentrak performed research indicating that a pre-roll ad in FOD has about a 120 index to the program rating. FOD viewers are also engaged since they are making a very specific and deliberate action to select and watch a show.

The largest part of FOD now consists of programs from the major broadcast and cable networks. Some of these content providers are now porting over the same ads that ran when the shows aired on regular or “linear” TV. Some are switching the ads out after four days to fit the traditional “C3” model. The content providers realize that over 78 percent of viewing to major broadcast and cable network shows happens after three days, so there is value in that ad inventory after four days, whether or not the ad copy is the same.

So why isn’t FOD programming chock full of ads?

Some of the reason has been technical. There was not an easy way to insert specific ads into FOD programs; it was akin to the old fashioned magazine business where the copy had to be ready two months prior to print. With digital ad insertion, and other technological fixes that problem has been significantly (but not completely) overcome.

But there is a deeper reason for the failure for advertising to take off. It goes back to the start of VOD reporting over eight years ago. Rentrak, with its history of managing and integrating massive amounts of data through its movie and DVD reporting services, with user-friendly systems that generate insights, became the operators’ choice to provide measurement. Rentrak’s measurement is a complete census. Every transaction/order from every provider of VOD in the United States is captured.

At the time of the creation of VOD, the cable operators thought that the bulk of VOD would be consumers ordering and paying for movies (both major studio releases as well as adult films). They also thought that consumers would like to be able to see regular TV programs when they wanted to, akin to what DVRs can do.

And at that time, the satellite companies could not deliver VOD, so the cable operators also thought that offering VOD would be a way to help hold on to customers. So the operators asked the broadcast and cable networks if program content could be loaded up to create FOD. The content providers agreed, but they had concerns about cannibalization of the audience from the main linear TV platform, as well as not having full strategies in place on how to generate revenue via advertising. The agreements became that a cable network could see its own shows (e.g. A&E can see A&E across all operators), or an individual cable operator could see how shows did within its own footprint (e.g. Time Warner can see how NBC and CBS perform within Time Warner’s footprint), but that was the extent of the transparency. Each “side” could see its own numbers, but the complete picture could not be revealed. In short, Rentrak’s census-level measurement was put into a straightjacket; only limited slices of the data could be shared with limited parties.

As anyone who has taken Economics 101 knows, for a marketplace to exist there has to be transparency. Right now, advertisers who want to see how programs might perform on VOD have to go ask each network for their numbers. In a world of shrinking advertising staffs, and the push to programmatic buying, there is not much willingness to enact business by making tons of phone calls and cobbling together numbers in Excel spreadsheets.

Therefore, transparency is needed. There has to be the full reporting of VOD programs by title in detail for C3 and up to 28-day levels. Only Rentrak with its census-based measurement can provide these numbers in a granular and stable manner. We are moving in this direction. Over 60 cable networks now allow us to produce a report showing monthly average transactions. (For insight into what that report can provide, check out my last blog. To order the report, contact Gordon Jones at Gordon.Jones@rentrak.com). And now we have a monthly series-level report for eight participating cable networks. These series-level FOD metrics now feed into our Total TV Audience report.

So, if a true ad marketplace in FOD is going to be created, full transparency must happen. I urge all the readers of this article who want to use the huge potential of VOD for advertising to contact their sales reps—no, go higher, and contact the sales heads of the networks you do business with and demand, “I want my FOD! Set Rentrak free!”

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