NEW YORK (AdAge.com) -- In the short history of online TV-watching, one standard has largely held fast: Shows that run online have significantly fewer ads than shows that run on the boob tube.
But that could soon change.
Starting this fall, Nielsen intends to start making available data that take into account viewing of commercials that run in a particular show, no matter whether they are seen online or on TV. The data will be made available for evaluation starting this September and are intended to become the basis for ad negotiations in February 2011.
But here's the catch: For Nielsen to be able to provide the commercial rating, shows seen online will have to have the same group of commercials that run on TV. If this system were adopted en masse -- and it's not clear that it would be -- online viewing might be crammed just as full of commercials as the more traditional TV-watching experience.
"That in itself is a challenge," said Rino Scanzoni, chief investment officer at WPP's Group M. "The consumer has been used to getting [online video] with either limited commercial interruption or no commercial interruption."
Indeed, viewing programs on Hulu, the online video site owned by NBC Universal, News Corp. and Walt Disney, means encountering significantly fewer ads than one would see watching TV. And Disney's ABC.com has met with some success by running ABC shows with just a few ads, often from a single advertiser.
But many TV executives say these methods don't bring much, if any, profit -- and therefore cannot continue.
"The financial models used for the current large video hubs in the online space are not sustainable," said Jack Wakshlag, chief research officer for Time Warner's Turner Broadcasting. One way to make online viewing more financially lucrative, several TV executives suggested, is to use it to aggregate viewing of popular shows across TV, online and other emerging media -- and then use that rating as a means of negotiating for the cost of an ad against the program.
What's lending traction to the idea of increasing the number of commercials in online TV runs is the "TV Everywhere" concept currently embraced by industry players Time Warner and Comcast, among others. Under the plan, cable subscribers would be able to watch their favorite shows via broadband for no extra fees, while non-subscribers would be blocked. If the media companies can use this idea to control how consumers watch TV programming, they may also be able to force a more traditional amount of advertising on them, too.
Nielsen says it is simply trying to come up with methods it believes its clients truly want -- and that this idea is only one solution among many it intends to offer.
"Ultimately, the programmers -- the guys who own the TV content -- they're all struggling to find out what the best business model is that works for them. There is a divide," said Sara Erichson, president–media client services, North America, at Nielsen.
She's not kidding. Some TV executives envision a day when ad-free online viewing might have to include a subscription of some sort to make it work financially. When faced with that prospect, said one TV-network executive, research suggests that 80% to 90% of people would rather watch TV online with the same load of ads as a traditional TV show. "People don't want to pay more subscription fees on top of their cable subscription fee," this executive said.
Yet others are more wary. Media companies "can monetize their internet video, but it's all going to come down to how the consumer actually responds," said Colleen Fahey Rush, executive VP-strategic insights and research, Viacom's MTV Networks. If "the ad load is higher than it currently is," she asked, could it "tamp down" consumption of video online?
One academic thinks consumers will, over time, accept more advertising in the digital realm. "It's not so much the ad load. It's much more about the convenience," said Tom Ksiazek, an assistant professor of communication at Villanova University. Research suggests that "viewers will watch those ads as long as the program is on the best available screen" for them at the time they want to view a program that is important to them.
Already, Mr. Ksiazek's theory has borne out under other circumstances. In 2008, ABC said it would increase the availability of popular shows such as "Grey's Anatomy" for video-on-demand viewing on cable systems -- as long as consumers had no ability to fast-forward past the commercials. Citing a trial of the concept it ran on a cable system owned by Cox Communications, ABC said 93% of people who had their fast-forwarding capabilities removed when watching ABC programs on-demand found having to watch ads an acceptable exchange for getting to see the programs free. About 20% of users said they used on-demand to watch an ABC program rather than using a digital video recorder.
At the very least, media companies appear ready to test out Nielsen's idea, though many of them say they will also embrace other experiments that bubble up in a time of great change for the industry. "We are exploring revenue models with various ad loads and promo loads," said Turner's Mr. Wakshlag, "but we won't really know what will shake out until the marketplace develops."
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