Media Forum: Will Video on Demand hit ads?

Will the effectiveness of traditional TV advertising be eroded, Alasdair Reid asks.

It was high time cable did something to recapture a bit of the limelight.

Its rivals have pretty much monopolised the agenda for at least the past year: Sky has been making a big noise about Sky Plus while quietly contributing to the penetration of digital by launching Freesat from Sky; while, of course, the really big sensation in multichannel TV in recent times has been the seemingly inexorable growth of the digital terrestrial platform, Freeview.

You could have been forgiven for thinking that cable has given up and settled for providing telephony with broadband internet access on the side.

Last week, ntl and Telewest disabused us of that notion when they both announced the launch of a Video on Demand service - the first such mass-market service outside the US, they claim. The proprietors of Home Choice, an existing Video on Demand service in the London area, may take issue with that, however.

The ntl service, called On Demand, will launch first in Glasgow and then roll out across ntl's other franchise areas throughout 2005. It will offer children's programming, a "pick of the week" option offering a selection of the best of the previous seven days' TV, a music video jukebox, soft porn and hundreds of films. What it won't be offering is advertising.

Not as we know it, at any rate. Not in terms of ad breaks full of conventional spot advertising.

This sort of development must make hearts sink in the offices of both media agencies and their clients. Month by month, it seems, we're seeing commercial inventory trickling away.

Multichannel platforms have been offering ad-free near-Video-on-Demand and pay-per-view film services for years but now we're seeing ever-increasing amounts of time-shifted viewing on Sky Plus - and personal video recorder-users are notoriously good at editing out ads.

So another potentially "disruptive technology" is surely the last thing we need. David Cuff, a television consultant with long experience of these issues, says that Video on Demand is similar to the PVR phenomenon in the ways that it modifies viewer behaviour - subscribers watch proportionately less advertising but more TV in general.

He states: "It would be wrong to underestimate the resilience of broadcast television but, yes, this is a further weakening of the traditional 30-second spot currency and it's a re-emphasis of the challenge the advertising industry faces if it wants to keep harnessing the power of television."

David Fletcher, the head of Medialab at Mediaedge:cia, agrees that the net effect in the long run will be similar to that of PVRs. He comments: "Disruptive technologies will result in the commercial TV audience declining by ten percentage points over the next five years. It isn't exactly the end of the world as we know it but it does present advertisers with a real need to look at how they use the mass media to communicate. The shine is coming off TV as the silver bullet, but that doesn't mean we should search for a new silver bullet. There isn't one. We have to use a range of strategies to make up for the fact that (live) TV isn't as it was."

David Walker, the media director of Kellogg, isn't so sure. Video on Demand may make a small difference to viewing patterns, he concedes, but that won't necessarily damage the effectiveness of existing advertising models. "The requirements of our business, particularly the promotional activities we focus on, mean that spot advertising plays an important part in what we do," he states.

However, Jonathan Sykes, the managing director of content and strategy at Home Choice, disagrees. He states: "With all due respect, the TV market is changing, and changing fast. Viewers in Video on Demand homes are not only watching more TV, they are getting a better experience out of their viewing. It's a virtuous circle - and one that represents a huge opportunity for programmers and advertisers."

And he argues they should embrace that opportunity sooner rather than later. He comments: "People switch back and forward between linear TV and Video on Demand, so if your brand is missing (from the latter) then that will have implications for the way people in those households view that brand. We are working to develop enriching opportunities for advertisers. They need to get involved now so they can acquire knowledge that they can build on and optimise in the future."

YES - David Cuff, television consultant

"The problem for advertisers is that the trend-setters who are the most likely to adopt Video on Demand match almost exactly the set of highest-value customers. So they will become increasingly elusive."

YES - David Fletcher, head of Medialab, Mediaedge:cia

"TV advertisers will have to work harder, giving audiences more than just a product message. Audio-visual programming is a major driver in people's lives and there will be an increasing number of ways to associate yourself with that content."

NO - David Walker, media director, Kellogg

"I don't see it as huge competition for broadcast TV. Video on Demand is a different viewing experience. You are talking about setting aside a couple of hours and sitting down in a different mindset. It's not something you do every day."

YES - Jonathan Sykes, managing director of content and strategy, Home Choice

"Video on Demand is creating a better experience for viewers - and they are watching more television too. That represents an opportunity for advertisers who are prepared to involve themselves."

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