On-demand presses the ‘off’ button for traditional tv model

Increasing levels of convergence and the wider availability of on-demand TV content are overturning the status quo long enjoyed by broadcasters and ad agencies. Marketers must adjust quickly, says Tim Davie

Imagine approaching Tesco’s head office with a product that you have spent two years designing and preparing for launch. After an uncharacteristically smooth meeting with the buyer, you are told that the chain intends to sell the product from 8pm on Thursday for just one hour in a Tesco Metro outlet. If all goes well, it may appear for an hour on the shelf in bigger stores. And then it will be withdrawn from sale, although it may feature as a Christmas special if it proves to be a best-seller.

A little far fetched? Not really. Many television programme makers have been in this position for years. Yes, they might get a chance to release a DVD at some stage, but thousands of programmes are aired just once or twice on a linear TV channel. Now fast-forward to an on-demand world where viewers have limitless access to the content of their choice.

The model becomes much more akin to marketing biscuits or shampoo, with channel – or “aggregator” – shelves stacked at all hours with the content that viewers love best. And the power of that model can be felt by listening to friends raving about how a personal video recorder (PVR) has changed their lives.

It is a force so strong that almost all media, telecoms and production companies are planning how to cope and prosper through times that promise fundamental shifts in the structures on which their revenue models are built.

Profound effects

This move to on-demand will have far more profound effects on the TV industry and marketers than the first phase of digital. The second phase is more fundamental, as it will put viewers fully in control.

In the short term, there will, quite rightly, be a huge focus on the significant challenge of delivering digital switchover in the UK, but for media companies and most households, that scenario is already old news. Today, 70% of UK homes have at least one multi-channel digital TV set. And by extending channel choice, most TV companies have kept their heads above water, but the next phase is far more complex. There are US analysts who claim that over 30% of TV revenues will come from video-on-demand (VOD) within a few years, while others think that figure will never reach more than 10% of the market.

Clearly, linear viewing has a future and will remain a large-scale business for a while yet. Events such as England’s World Cup campaign will be a tremendous drama, best served live. However, the next 12 months will give a sense of just how rapidly on-demand services are going to reshape viewing habits.

Today, about 2 million UK households have PVRs or VOD services, but we are set for numerous initiatives across platforms that will move these services into the mainstream. We will see more PVRs allowing cable, digital terrestrial and satellite customers to receive quality, time-shifted and VOD content.

Recent announcements from companies such as BT and Sky that they are to launch internet protocol TV (IPTV) services are pushing interactivity and on-demand functionality to a new level. Google, Yahoo! and Apple are all in the market with broadband video players.

At the BBC, following a trial of 5,000 people, we have outlined plans for our interactive player, which will allow everybody to view the past seven days of BBC programmes on-demand. Already, the BBC is streaming over 60 million pieces of audio or video content a month through online services like RadioPlayer.

Although this first phase of on-demand is a critical one, perhaps the true explosion will come only when the convergence of devices becomes a reality for most households.

Short-term fix

An interactive broadband player is good when it is played on a PC in the office or in a bedroom. But its impact becomes much more fundamental once you can send what’s on the PC to your telly with no fuss. But even that will be a short-term fix, until every screen becomes connected to as much interactivity and content as viewers want.

For marketers, it is easy to find both on-demand evangelists and hardened sceptics. Whatever your stance on the speed and scale of the changes, they throw up deeper questions than just ad skipping for marketers – as if that wasn’t enough.

For instance, should marketers now be viewing telecoms companies in the same light as traditional commercial TV broadcasters, and quickly expanding the list of who they regard as key media partners? And is now the time for brands to deal directly with those actually producing the programmes, in order to build relationships that stretch beyond a particular distribution method and look at the total life-cycle of a piece of content? Should we be more concerned with producing great content rather than traditional advertising?

Finally, do we have agency partners who can cope with the challenge? Interestingly, it has been reported that Unilever is setting up in-house groups to work on cross-media solutions to communication, because it felt its agency partners were not up to the task. Perhaps, as we begin to feel the seismic changes that on-demand will bring, the only way forward for marketers is to open new dialogues and ask more questions.