Home Analysis Advertising Stop worrying: More VOD is a good thing for TV

Stop worrying: More VOD is a good thing for TV

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For some time there have been concerns that if more people watch their television on-demand, overall advertising revenues in the industry will fall, because it is harder to monetize time-shifted viewing than linear TV. But these fears were recently dismissed by several of the executives responsible for the content and platforms that are encouraging the growth on-demand viewing, and also by a leading advertising executive.

During a panel debate at Future TV Advertising Forum before Christmas, there was consensus that VOD complements linear TV, that on-demand viewing is largely incremental and that it does not undermine revenues from traditional advertising. Julia Jordan, Executive Director Business & Operations at UKTV, whose channel brands include Dave, Gold and Good Food Channel, said VOD is not a competitor to TV and pointed to the continuing strength of live TV despite the growth of on-demand.

Her company is rolling out catch-up TV services, including for the Dave and Yesterday brands, and Jordan says channel owners need to make their content as accessible as possible. “On-demand viewing is almost entirely incremental viewing,” she argued.

Pierre de Montesquiou, Head of IPTV at the French commercial broadcaster TF1, said the scale of on-demand viewing meant it was not cannibalising linear TV. He pointed out that you could get nine million viewers for a primetime broadcast and it would take another month to reach the same figures through catch-up TV. “And what motivates the catch-up viewers is their wish to see shows they missed, so for advertisers this is an additional audience.”

Martin Heaton-Cooper, VP, Commercial Development at Discovery, said the advertising rates for on-demand inventory are higher than for linear today. Drawing on his own experience watching UK catch-up services, he pointed to one half-hour programme that had eight 30 second ads at the beginning and another six in the middle. “They must be making more money online than on linear TV for the ads,” he suggested.

Heaton-Cooper was not worried that an increase in on-demand inventory would depress prices for advertising everywhere, over time. “We have not reached the scale [of on-demand advertising inventory] where that is an issue – so far it is not happening.”

Simon Kelehan. Head of Content at UPC Ireland, which launched VOD and catch-up TV services last year, said there is actually a shortage of on-demand advertising inventory, rather than too much. “Some of the channel partners I work with told me their online services are sold out. They had advertisers coming to them saying that Head Office insists they spent X% of their ad budget on digital but they have nowhere to spend it.”

Kelehan said the shortage is for inventory against quality content that can generate big volumes of viewers. “The advertisers did not want to spend it on YouTube but against primetime content but there is not enough inventory in the market. So hopefully we have a scenario where you can sell out that extra [on-demand] inventory without affecting linear TV.”

Jordan at UKTV thinks it will be possible to attract new money to television thanks to sophisticated technology that enables more interactivity and deeper engagement. Targeted advertising is an obvious example. Asked what the effect would be for the television industry if catch-up TV viewing doubled in the next year, she was hopeful that everyone would make more money. “It is incremental viewing and incremental value and that has to be an opportunity,” she said.

It has been argued that a VOD audience is actually a better audience. Mark Freedman, Strategic Programs Director at the Canadian telco and IPTV provider TELUS, has made this point previously. Freedman, who helped plan and implement the advanced advertising platform at Canadian cable operator Rogers, has pointed to research showing that VOD viewers are effectively a more distilled and better version of the general TV viewer.

You can see how that makes sense where VOD requires an analogue-to-digital subscription upgrade. On platforms that are all-digital, the picture is more complex. Mark Brandon, Commercial Director at Virgin Media, one of Europe’s VOD pioneers, noted that for some advertisers and types of brands, with certain requirements in terms of demographics or frequency, for example, VOD could provide a greater impact (and he was referring to standard rather than targeted VOD advertising).

But he added: “It is horses for courses. It does not necessarily follow that VOD is better than average for every advertising type.” Paul Wright, Chief Digital Officer at OmnicomMediaGroupa leading advertising and media planning company, said there is some evidence, in certain audiences, that VOD advertising is more powerful than other types of TV advertising.

“We have done some work where we deliberately targeted VOD audiences through certain programmes. They were not necessarily big ratings programmes; the first series of Game of Thrones is a good example. That was very much a VOD catch-up show. It is not a general rule that all VOD audiences are better, but for a certain advertiser and certain campaigns going for VOD makes sense.”

Wright pointed out that advertisers do not look for distinctions between linear and VOD, anyway. “Clients ask us all the time what they should be doing in this area but we rarely talk about VOD in a single conversation – it is always part of a much broader communications planning strategy.”

He warned against the danger of treating VOD advertising as a silo. “Our advertisers are looking at the whole consumer journey and consumers do not make a distinction between what is or is not a VOD platform. To them it is just content and devices.”

Wright pointed to the explosion in advertising options in the digital age and how you can advertise virtually everywhere and suggested that the debate about whether broadcasters had to swap analogue dollars for digital pennies was no longer an issue.

Mark Brandon pointed out that everyone is following the consumer anyway, and on-demand is where the consumer wants to be. So the conclusion from this debate? On-demand is here whether you like it or not, but the good news is that it is not cannibalising traditional TV revenues. More on-demand is a good thing, not bad, and the industry can afford to have more on-demand viewing.


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