Younger demos may be leading the charge into online video, but adults are not far behind.
Just consider YouTube, which has emerged as the 800-pound gorilla in the online video business with 77 million users — a hefty proportion of the 120 million Americans who watch video online each month.
“If you look at the age profile, 64% of all YouTube users are over the age of 35,” said Jack Wakshlag, chief research officer at Turner Broadcasting System. “Over the last year, almost 70% of YouTube’s growth has come from people 35 years and older. The 18-to-24 age group has accounted for less than 2% of its growth; 25- to 34-year-olds less than 5% of its growth.”
The tale of YouTube’s move into the mainstream of adult demographics highlights the important role that digital media is likely to play for the television industry in 2009, as traditional advertising revenue is likely to slump.
A few programmers are even declaring that digital media are strategically as important as their linear networks. “We don’t look at CNN any more as having a core business of linear television,” CNN.com senior vice president and general manager KC Estenson said. “Obviously we make more money on linear, but from top to bottom this year we’ve been looking at CNN as having a core business of serving news and information.”
All of CNN’s ad deals are now multiplatform, incorporating digital components, as well as television. So far, usage of its Web product CNN.com Live this year has increased by 300% — nabbing a record of 5 million live streams on Election Day — with the linear network also setting ratings records. And CNN isn’t targeting tech-savvy kids. The average age of the CNN Live user is 47.7.
Others also see the advantage of multiplatform plays in a tough ad climate. “We’re in a strong position because we want to work with an advertiser not only on a specific show but we can work with them across platforms,” said Discovery vice president of digital media distribution Rebecca Glashow.
Just how those digital budgets will be impacted by the downturn remains to be seen, however.
“I think the first budgets that will be impacted by the economy will be for some of those experimental newer platforms,” said Mark Garner, vice president of affiliate distribution and business development at A&E Television Networks. “But if you are one of those strong brands that have delivered audiences consistently in the past, you are more likely to tap into those budgets than those who are newer to the game.”
Tracey Scheppach, senior vice president and video innovation director at Starcom Worldwide, said her company’s clients remain committed to exploring newer digital platforms. “A lot of people say advertisers will be less willing to test and experiment. I haven’t seen that. If you are going to cut, you are going to cut the big stuff,” which is linear television.
The key issue, according to Scheppach, will be making the traditional television advertising model more attractive by improving the available data and deploying advanced advertising platforms like addressable advertising that will allow operators to deliver ads targeted to the demographics of a specific home.
That is the goal of Canoe Ventures, the joint venture among the six largest U.S. cable operators to develop advanced advertising services and technologies. “Canoe’s efforts [to build advanced advertising platforms] have to be a success,” she said. “What we need in this economy is greater efficiency.”
Canoe is scheduled to launch its first product in the first quarter of 2009 and Starcom is working with Cablevision Systems and Comcast on separate trials of addressable advertising systems.
But most believe these newer advertising platforms will not have a significant impact on the industry until 2010. In the meantime, many programmers and some operators are looking to put more emphasis on their Internet business and use cross-platform deals to bolster their traditional linear advertising.
Zenith Optimedia is predicting that TV advertising will drop in 2009 by 6.7% while Internet advertising will increase by 18.1%.
One notable development is a push by Comcast and Time Warner Cable to use their large base of video and high-speed Internet customers to build up sites with extensive offerings of online video.
“For cable, making more video available on their Web sites will be a new source of online revenue and a way to keep cable customers from cutting the cord,” said James McQuivey, principal analyst at Forrester Research. “I would expect to see much more of that in 2009.”
One of the most aggressive efforts can be found at Comcast’s Fancast.com, which dramatically increased its video offerings in 2008. Between January and November 2008, it boosted unique users by over 200% and the number of video views by 550%.
“Watching full-length premium content online has now become a pretty mass-market activity,” said Karin Gilford, senior vice president of Fancast and online entertainment for Comcast Interactive Media.
While Gilford acknowledged the large lead that some online players, notably YouTube, have in users, she stressed the unique strengths cable operators have in their established relationship with programmers.
“One of our competitive advantages is that we can deliver the quality and viewing experience consumers are going to demand and expect,” Gilford said. “In the last 12 months, we are seeing that consumers aren’t going to accept having their favorite show chopped up into clips and loaded onto YouTube. Online, they want to come close to the experience they’re getting in their living rooms.”
Beyond stressing their ambitions to make Fancast.com a major destination for TV programming, Comcast executives declined to be specific about their plans. But several programmers note that Comcast and Time Warner Cable are experimenting with technologies that would “authenticate” whether a user was a cable subscriber. Those existing customers would then have access to a much wider array of video content. Both subscription and advertising models are being considered, depending on the type of content.
Several ad-supported programmers endorsed the idea. “The operators are looking to roll this out over the next year and we are looking to test with them,” said Denise Denson, MTV Networks executive vice president of content distribution and marketing. “We are looking forward to working with Comcast and Time Warner to make sure our content can be accessible.”
The push for expanding online video is also good news for premium networks looking for ways to better serve their subscribers in a difficult economic climate.
Starz has already rolled out online product Starz Plays available to Verizon FiOS subscribers for an extra fee, and it is in talks with cable operators about bundling the product with its premium TV channels.
Tom Christie, Showtime Networks executive vice president of affiliate sales, added his network is also exploring the idea: “The operators are ramping up the content they have on their broadband sites and we’re beginning to talk to them about these kinds of services.”
David Zagin, executive vice president of distribution at A&E Television Networks cautioned that the business models for online video partnerships between MSOs and programmers “are really up in the air. The conversations are different with each distributor. Each has their own plan about how much content they want and how they want to program the platform.”
Still, some programmers see those issues easier to solve than problems they face with video on demand.
“We have over a billion VOD orders this year on Comcast alone, but we’ve made virtually no money in advertising in that space,” said MTVN’s Denson. “I think VOD really needs to be one of the first things that Canoe addresses. With the convergence of the TV and the Internet, there is a danger that the Internet’s interactive content could usurp it. It’s unfortunate but programmers will have to put their content where they can actually monetize it.”