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									     Advanced TV advertising
      Market Overview and Trends

        Amsterdam, 11 May 2010



Vincent Létang, Head of Advertising Research
About Screen Digest
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        Screen Digest          •   50 analysts (London, Carmel ca.)
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Advanced TV advertising Conference 2010
Screen Digest


•   Challenged, mature TV ad market needs new drivers
•   The end of spots is postponed
•   TV advertising on new platforms
•   Broadcast ATVA: case studies
Advanced TV advertising Conference 2010
Screen Digest


•   Challenged, mature TV ad market needs new drivers
•   The end of spots is postponed
•   TV advertising on new platforms
•   Broadcast ATVA: case studies
TV advertising: a mature, challenged market

• Pay TV has already outgrown advertising as the main form of
  funding for television in Western Europe

Television revenues by type, Western Europe (%)
100

 90

 80

 70

 60

 50

 40

 30

 20

 10

  0
      99   00   01   02   03    04     05    06     07   08     09     10       11   12   13   14

                     Pay TV revenues    Public funding   Advertising revenues
TV advertising: a mature, challenged market
2009: the worst advertising recession ever
                                           Key:
                                        - Positive growth
•   Nowhere to hide in 2009
                                        - Between 0% and -14%
•   Economic recession, CPM bubble      - Between -15% and -24%
    deflation (Spain, CEE) and
    regulatory disruption (France)      - Between -25% and -30%
    combined to create two-digit fall
                                        - More than -30%
•   TV advertising sales fell between
    5% and 15% in Western Europe
•   Major exception was Spain, down
    23%
•   Decline was steeper in Central
    and Eastern Europe
•   Bulgaria and Ukraine saw TV
    advertising contract in excess of
    30%
•   Poland was only market to avoid
    double-digit dive
TV advertising: a mature, challenged market
2010 rebound but not everywhere
                                            Key:
                                         - Positive growth
•   UK, the more volatile market,
                                         - Between 0% and -14%
    rebounded strongly in H1 (8 to
    10% FY growth expected)              - Between -15% and -24%

                                         - Between -25% and -30%
•   CEE markets bottomed-out in Q3
    2009                                 - More than -30%


•   Nearly all CEE markets will return
    to growth in 2010
•   Ukraine positive in Q409 already
•   But GDP forecasts not
    unanimously positive
•   Most CEE countries will only see
    single-digit growth, as GDP only
    climbs modestly
•   Only 2011 will see return to
    double-digit growth
TV advertising: a mature, challenged market
Therefore ATVA is required as growth engine
• Beyond the 2010 rebound, TV advertising faced with sluggish mid-
  term growth
   Television ad revenues (billion euros)
   30
                                           CAGR 2003-08: +2.5%                2009:      CAGR 2009-14: +2.7%
                                                                              -14%
   25



   20



   15



   10



    5



    0
        1999   2000   2001   2002   2003   2004   2005   2006   2007   2008   2009    2010   2011   2012   2013   2014
Advanced TV advertising Conference 2010
Screen Digest


•   Challenged, mature TV ad market needs new drivers
•   The end of spots is postponed
•   TV advertising on new platforms
•   Broadcast ATVA: case studies
Advanced TV advertising Conference 2010
Screen Digest


•   Challenged, mature TV ad market needs new drivers
•   The end of spots is postponed
•   TV advertising on new platforms
•   Broadcast ATVA: case studies
Advanced TV advertising Conference 2010
Screen Digest



                               The report of my death
                                was an exaggeration.
                                                                             The report of my death


 The death of spots is… postponed
                                                                              was an exaggeration.




‘30s’ strengths                            ‘30s’ threats/competition

• Still 90% of free TV revenues…
• Trading provides scale and cost-efficiency… commoditized, deflationary market
                                             but

                                           but branding losing ground as a
• Proven efficiency for branding…
                                           marketing priority

• Seems to resist DVR ad-skipping so far…
• Programming can curb time shifting      but DVR usage growth still a threat

• Linear addressable 30s sounds ‘best of
                                           but full-scale addressability yet to prove
both worlds’…
                                           feasible and bringing incremental
                                           revenues
 DVRs and advertising
 72% of DVR homes in the UK by 2013
Installed base of DVRs in the UK (000s)
25,000



20,000



15,000



10,000



 5,000



    0
     2007       2008          2009              2010           2011          2012          2013

             Sky+ (UK only)   V+     IPTV DVRs (BT, Tiscali)   Freeview+   Freesat+
                                                                                Source: Screen Digest
DVRs and advertising
Europe trails the US: DVR still to take off
Penetration of pay-TV DVRs (2007-2013)
50%

45%

40%

35%

30%

25%

20%

15%

10%

 5%

 0%
       USA       UK       France   W. Europe   Germany    Italy          Spain


                          2007        2009         2013
                                                                  Source: Screen Digest
DVRs and advertising
Towards 20% of viewing time-shifted

 Time-shift viewing patterns among UK DVR users
 3.5

 3.0        34' (17%)
                                                                       23' (13%)
 2.5
                                          23' (15%)
 2.0

 1.5

 1.0

 0.5

 0.0
          Sky+ Homes                     V+ Homes                  Freeview+ Homes

                        Live viewing (hours)   Timeshifted viewing (hours)

                                                                             Source: BARB, BSkyB
DVRs and advertising
2009: a neutral or positive impact
DVRs and advertising
2014: up to 6% loss in exposure
DVRs and advertising
A blessing or a curse?

On the plus side
• DVRs boost total television viewing (UK: +14%)
   – DVRs make the TV experience more enjoyable
• Time-shifted viewing can be measured and monetized
• Connected DVRs can be a platform for addressable and
  interactive ad formats
On the down side
• Most of the extra viewing is time-shifted (UK: 15%)
   – Some genres are even more recorded/time-shifted (drama)
• Ad-skipping (fast-forwarding ads during playback) is
  growing (UK: 70%)
DVRs and advertising
A blessing or a curse?


• Screen Digest modelling suggests exposure to linear
  advertising could lose 6% by 2013 as a result of increased
  DVR usage

• This is not per se a significant threat to the ‘30s’ ecosystem
  (given the all-time levels of overall TV viewing)

• However, broadcasters, platform operators, ad agencies
  and content providers must start to explore alternatives
  and enhancements to traditional formats
DVRs and advertising
Digital TV drives advertising exposure

  Number of spots viewed per viewer per day in the UK
  50
  45
  40
  35
  30
  25
  20
  15
  10
   5
   0
         2002      2004       2006      2007       2008   2009
                                                           Source: BARB
Advanced TV advertising Conference 2010
Screen Digest


•   Challenged, mature TV ad market needs new drivers
•   The end of spots is postponed
•   TV advertising on new platforms
•   Broadcast ATVA: case studies
Advanced TV advertising Conference 2010
Screen Digest


•   Challenged, mature TV ad market needs new drivers
•   The end of spots is postponed
•   TV advertising on new platforms
•   Broadcast ATVA: case studies
  ‘Advanced’ TV advertising
  Now available through multiple platforms

                                      ‘Advanced’ TV advertising (ATVA)




1. ‘Broadcast’ platforms                    2. Alternative platforms              3. Connected TV

Alternative, interactive and/or             Alternative, interactive and/or       On-demand TV content and
addressable forms of advertising in         addressable forms of advertising on   alternative content, serving platform
the lean-back ‘telly’ environment           lean-forward, personal devices        for ATVA


                                                                                   Built-in open internet TVs
Two-way, walled-garden                      Online TV (ad-funded FVoD)
platforms: IPTV, digital cable
                                            Mobile TV (apps, players)              Connected devices (set-
                                                                                   top boxes, game consoles)
Broadcast technologies:
                                            Digital Signage
satellite, terrestrial
Red-button interactivity
DVR-based advertising
Multiple platforms for advanced TV distribution
and advertising
3 concurrent stages:
• Stage 1: Broadcast stage Free (ad funded)
   & Pay TV (subscription)
• Stage 2: Personal devices PC and portable
   devices
• Stage 3: internet-powered TVs (ads,
   subscription, retail)
Multiple platforms for advanced TV distribution
and advertising

                        Worldwide broadband connections (m)
750


600


450


300


150


  0
  2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
        North America      W Europe   C&E Europe   Asia-Pacific   Latin America

                                                                      Source: Screen Digest
Online TV: Broadband penetration is
outgrowing walled-garden TV …

VoD vs broadband household penetration 2009 (%)
100
 90
 80
 70
 60
 50
 40
 30
 20
 10
  0
         USA      France    Germany     Italy     Spain         UK
                Pay TV VoD enabled    Broadband enabled
                                                          Source: Screen Digest
Online TV: Broadband penetration is
outgrowing walled-garden TV …

VoD vs broadband household penetration 2014 (%)
100
 90
 80
 70
 60
 50
 40
 30
 20
 10
  0
        USA       France   Germany      Italy     Spain         UK
               Pay TV VoD enabled     Broadband enabled
                                                          Source: Screen Digest
Online TV: revenues doubled in 2009
Free ad-funded online VOD is the bulk of it

Online TV revenue (€m)
120

100

 80

 60

 40

 20

  0
      2008   2009   2008   2009   2008    2009   2008   2009   2008        2009

        France       Germany          Italy         Spain             UK
                    DTO    PPV    Subscription   Ad funded
                                                               Source: Screen Digest
Online TV: broadcasters’ catch up services are
capturing the largest share of ad sales
    2009 share of ad-supported online TV revenues
                                                                   1%
                                                          0%
    UK                                     France                    2%
                  8%                                               4%
             5%                                               6%
            1%
           3%
          3%




                           80%
                                                                          87%



                                                                   0%
   Germany
                        0% 0%              Italy              2%
                                                                    1%

                    0%8%                                           6%

              19%                                                               42%


                                                      49%
                                 73%




         Broadcasters            Portals   Pay-TV operators         Premium cable channels
                                                                                             Source: Screen Digest
Online TV: will be less than 3% of TV revenues
in every major market by 2014

Share of total TV revenue
100%
 90%
 80%
 70%
 60%
 50%
 40%
 30%
 20%
 10%
  0%
        2009 2014 2009 2014 2009 2014 2009 2014 2009 2014 2009 2014

            UK          France      Germany              Italy           Spain             USA
       TV Advertising     Pay TV Subcription               Pay TV VoD             Online TV
                           Notes: Pay-TV VoD is sports & TV shows only, online TV is sport, TV shows and news
Connected TV: Connected devices are going to
be mass market by 2014
       US: active connected          EU 3: active connected
            devices (m)                    devices (m)
25.0                          25.0

20.0                          20.0

15.0                          15.0

10.0                          10.0

 5.0                           5.0

 0.0                           0.0




             2009   2014                   2009   2014
                                                         Source: Screen Digest
Connected TV: Sony is offering European
broadcasters’ catch-up services on the PS3

• Sony is using a short-cut built into the PS3 main menu to link
  to broadcaster’s catch-up services
   – iPlayer PS3 accounts for ~8% of all consumption (down from
     10% in the first 2 weeks after launch)
   – LaSexta PS3 accounts for 7% of long form streams (launch
     month)
Advanced TV advertising Conference 2010
Screen Digest


•   Challenged, mature TV ad market needs new drivers
•   The end of spots is postponed
•   TV advertising on new platforms
•   Broadcast ATVA: case studies
Advanced TV advertising Conference 2010
Screen Digest


•   Challenged, mature TV ad market needs new drivers
•   The end of spots is postponed
•   TV advertising on new platforms
•   Broadcast ATVA: case studies
‘Advanced’ TV advertising
Multiple formats

  Interactive                                                          Addressable


Non-linear formats                            Linear formats



‘Red Button’ RFI                              Ad-funded VoD (online, on TV, over-the-top)

Branded interactive channels                  Addressable , substitutional linear spots
EPG advertising                               (live, time-shifted)


                        ‘Green Button’: long-form ad
                        content on demand
EPG-based advertising
A huge potential, difficult to unleash

• A huge, untapped, captive audience:
   – 76% penetration*
   – 8 sessions per day*
   – Dwell time 10 minutes per box per day*


• Obvious client categories: broadcasters (new shows),
  other media providers (film, DVD), conventional brands

• Already developed in the US (Rovi) but the neutrality of
  cable/satellite platforms is strongly regulated in Europe
                                                      *Source: Rovi
EPG-based advertising
Captive audience to promote TV shows




                                       Source: Rovi
EPG-based advertising
Captive audience to promote TV shows




                                       Source: Rovi
    TV VOD advertising
    Virgin Media VOD going dynamic

                                                  Ad
          Ad              TV operator
                                                server


                                                 VoD
      Content             TV operator
                                                Server

Advertisement decoupled
      from content

                                Asset request            Ad   Content
Addressable TV advertising
Introducing ‘Sky AdSmart’

• New concept by Sky Media, well received by agencies and
  advertisers
• Alternative spots pushed to the partitioned hard-drive
• Used for VoD advertising and ad substitution in linear feed

• Targetability according to: post-codes, socio-demo,
  household structure (no mention of ‘behavioural targeting’)
• Privacy: opt-out option, no regulatory issue
• Fast-forwardable? Yes, fully: subscriber is the priority
Addressable TV advertising
Sky AdSmart Roadmap
• 2010: on-demand targeted advertising
   – Launch on Sky Player (PC and XboX360) followed by Sky
     Anytime on TV.
   – Single-advertiser substitution (substituting a Tesco spot with
     another Tesco spot: multiple copy)

• 2011: linear targeted ad insertion
   – Starting with 2m Sky+HD homes
   – Channels: at launch, only Sky-owned channels, then ‘partner’
     channels (Discovery, MTV, etc)
   – Still single-advertiser

• 2012: the Full Monty, the ‘Holy Grail’
   – Across all channels (but negotiations with third-party sales houses
     need to take place)
   – Multiple advertisers (substituting a Tesco spot by a Ford spot)
Addressable TV advertising
AdSmart: Key success factors


 Scale (installed base)
 ‘Local’ server capacity: advanced PVRs (or local
  servers)
 Targeting capability
 No regulatory issues
 Ad sales skills and technology skills in-house
 Vertical integration and in-house channels
Addressable TV advertising
AdSmart Economics: geo-targeting opportunity

• 5% to 10% of the UK TV inventory is sold region-by-
  region (£200 to £300)
• Today only ITV1, C4, C5 have multiple full-time
  regionalised feeds on satellite

• DVR-based solutions (or server-based solutions) open
  the ‘regional’ market to all other channels in a cost-
  effective, scalable way
• Plus unlimited micro-geo-targeting possibility
• Plus (combined with) other forms of targeting
   – E.g. ABC+ households in a given post-code
Addressable TV advertising
In the US…

• Cable operators, entitled to sell 2 minutes or ad inventory
  per hour
• 50% of this is sold on a regional/local basis

• Project Canoe to develop common standards
• EBIF standards for basic interactive application (Red
  Button style telescoping)
Addressable TV advertising
In the US…

• DirecTV and Dish to launch Advanced Satellite
  Advertising Platform (ASAP), joining forces to offer a
  national footprint for interactive enhancement
  (Telescoping, RFI, dedicated brand channels)
• Hope to grow from 60 to 100+ campaigns a year

• At the same time in the UK: BSkyB stops Red Button
 Conclusions


• Death of the 30s spot is ‘postponed’
• But TV formats need to evolve to match new consumption
  patterns, fight back commoditization, claw some of the
  ‘addressability’ budgets back from online/mobile space
• Ad-funded VoD business model already works online
• Advanced set-top boxes can help rejuvenate ‘red button’ style
  interactive spots
• EPG-advertising has potential but huge regulatory constraints
• Addressable linear advertising could bring ‘best of two worlds’
• But many obstacles to overcome and no guarantee of
  incremental revenues for every one in the ecosystem
Thank you

Vincent Létang, Head of Advertising Research
Dan Cryan, Head of Broadband Media



vincent.letang@screendigest.com
dan.cryan@screendigest.com
+44 207 424 28 20
DVRs and advertising
Europe trails the US: DVR still to take off

TV advertising revenues in Western Europe (€bn)
30
                                                      2009
                           CAGR 2003-08: +2.5%                   CAGR 2009-14: +2.7%
                                                      -14%
25


20


15


10


 5


 0
     1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
  ‘Advanced’ TV advertising
  Now available through multiple platforms

                                      ‘Advanced’ TV advertising (ATVA)




1. ‘Broadcast’ platforms                    2. Alternative platforms              3. Connected TV

Alternative, interactive and/or             Alternative, interactive and/or       On-demand TV content and
addressable forms of advertising in         addressable forms of advertising on   alternative content, serving platform
the lean-back ‘telly’ environment           lean-forward, personal devices        for ATVA


                                                                                   Built-in open internet TVs
Two-way, walled-garden                      Online TV (ad-funded FVoD)
platforms: IPTV, digital cable
                                            Mobile TV (apps, players)              Connected devices (set-
                                                                                   top boxes, game consoles)
Broadcast technologies:
satellite, terrestrial
Red-button interactivity
DVR-based advertising
Connected TVs: manufacturers making deals
with content providers
•   In Europe Germany and UK, manufacturers have already made deals with,
    resp., 27 and 13 different content providers
•   Most widely distributed are include YouTube and LoveFilm
•   Some integration from terrestrial broadcasters either directly or via Freesat
    (iPlayer, Demand Five)


Germany: Content deals from leading TV manufacturers
                  Overall content   Premium content   Local Providers   Broadcasters
     Philips            16                3                 12          ZDF, ARD, Arte
                                                                         ZDF, ARD TF1
    Panasonic           10                4                 7
                                                                          (Eurosport)
                                                                           Prosieben
       LG               2                 1                 1
                                                                          (Maxdome)
    Samsung             9                 3                 7                 ARD
      Sony              4                 2                 1               ARD
TV advertising: a mature, challenged market
2010 rebound but not everywhere
                                            Key:                   ANIMATED
                                         - Positive growth

                                         - Between 0% and -14%

•   UK, the more volatile market,        - Between -15% and -24%
    rebounded strongly in H1 (8 to
                                         - Between -25% and -30%
    10% FY growth expected)
                                         - More than -30%
•   CEE markets bottomed-out in Q3
    2009
•   Nearly all CEE markets will return
    to growth in 2010
•   Ukraine positive in Q409 already
•   But GDP forecasts not
    unanimously positive
•   Most CEE countries will only see
    single-digit growth, as GDP only
    climbs modestly
•   Only 2011 will see return to
    double-digit growth
TV advertising: a mature, challenged market
2009: the worst advertising recession ever
                                           Key:                   ANIMATED
                                        - Positive growth
•   Nowhere to hide in 2009
                                        - Between 0% and -14%
•   Economic recession, CPM bubble      - Between -15% and -24%
    deflation (Spain, CEE) and
    regulatory disruption (France)      - Between -25% and -30%
    combined to create two-digit fall
                                        - More than -30%
•   TV advertising sales fell between
    5% and 15% in Western Europe
•   Major exception was Spain, down
    23%
•   Decline was steeper in Central
    and Eastern Europe
•   Bulgaria and Ukraine saw TV
    advertising contract in excess of
    30%
•   Poland was only market to avoid
    double-digit dive
‘Advanced’ TV advertising
Multiple formats

  Interactive                                                          Addressable


Non-linear formats                            Linear formats



‘Red Button’ RFI                              Ad-funded VoD (online, on TV, over-the-top)

Branded interactive channels                  Addressable , substitutional linear spots
EPG advertising                               (live, time-shifted)


                        ‘Green Button’: long-form ad
                        content on demand

								
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