Next-gen TV fragments TV ad market

Paul Sumner, Analysys Mason
21 Jul 2008
00:00

The emergence of new ways of delivering television content and new devices on which to view that content, or next-generation TV, is disrupting the TV market. In particular, the TV advertising market is becoming fragmented and its overall size may decrease as the efficiency of traditional methods of TV advertising is called into question.

For consumers, next-gen TV allows for the non-linear consumption of TV content, or without the restrictions of broadcast scheduling. It also allows consumption through personal devices such as PCs, mobile phones, portable media players or portable games consoles. This means an increasing control of consumers' viewing as they can access TV content whenever and wherever they want.

On the business side, next-gen TV offers opportunities for new players in both the telecoms and media spaces to enter the TV market. Next-gen TV is attracting a great deal of interest and is often seen as an area of great potential growth, although there is still uncertainty over who is best placed to capture and benefit from this growth and how best to monetize the opportunities. One particular area that is open to discussion is advertising.

Traditionally, advertising slots at 'prime time' - during popular programs, that are often although not always, aired during prime time - or major sporting events, command a price premium over slots at other times of the day or during other programs. Similarly, advertisers often choose to air their ads at particular time slots to target a given market segment.

The emergence of next-gen TV, and particularly non-linear viewing, undermines the value attached to time slots as viewers are able to shift their viewing to a time which is convenient for them. Still, the incremental value associated with popular programs or major sporting events is still applicable.

This issue is further complicated by both the viewer's expectation that video on demand content often comes without advertising and the ability to skip ads during offline content play, such as with a personal video recorder or similar device. For example, the Olswang Convergence Consumer Survey 2006 showed that 62% of Sky+ (a PVR system offered by satellite broadcaster BSkyB) viewers in the UK skipped ads all the time, with 24% skipping them most of the time.

This changing landscape raises a number of questions. Will the traditional TV ad spend move into different areas such as online advertising‾ How can advertisers react to maintain the level of effectiveness of their TV ad spend‾ What can next-gen TV providers do to help advertisers achieve this aim‾

While the emergence of next-gen TV brings up a number of risks for advertisers, it also offers clear opportunities for both the advertisers and next-gen TV providers. In the case when a viewer is online or connected to a fixed or mobile telecoms network, the advertiser can make use of the return path (or uplink) to offer more interactivity. Viewers could be asked if they would like to see an ad for a car or a soft drink rather than being shown the same ad regardless.

Further, viewers could be placed into one of a number of categories based on their historical viewing or browsing habits and shown advertising targeted at that demographic, with the network operator or ISP managing this data and the insertion of ads.

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