At a Crossroads: The Digitalization of TV

Viewpoint: Razorfish's Terri Walter

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Terri Walter
Terri Walter

TV is experiencing a fundamental shift. And it is not just because of the recession or the transition from analog to digital broadcasting (now slated for June), both of which are putting pressure on future growth. TV is going digital in all aspects -- from its infrastructure and its content-distribution models to its advertising and audience measurement models.

Fragmentation will challenge the TV business model and with that comes numerous challenges: declining viewership on a show-by-show basis within broadcast TV; challenges to the business model of premium content production and distribution; and, hence, risk of declining advertising revenue, which could change TV advertising as we know it.

Advertising on broadcast was roughly 63% of the total $76 billion TV advertising market in 2008. Interactive TV, a small $60 million ad market in 2008, according to eMarketer, has been emerging for many years, but adoption by marketers has been slow mainly due to issues of scale. Is interactive TV ready for prime time?

As we look at the future of TV, we see a few defining trends:

The rise of the long tail of TV
Broadcast TV will begin moving from mass to niche in both audiences and programming. Is it possible that broadcast TV will go the way of cable and eventually charge consumers subscriptions for premium programming? If viewership on a program-by-program basis, and the economics of the industry continue along a downward spiral -- and advertising aggregation cannot offset the costs -- we may see this happen.

The digitalization of the TV infrastructure
As TV becomes a more fragmented landscape, technology will be needed to help manage the buying, planning, ad serving and measurement of next-generation TV across numerous channels. Platforms like Google TV Ads and Navic, which introduced a supply-and-demand model for buying and selling, will grow in importance because they offer sophisticated targeting in TV beyond just demographics, simplify the trafficking and reconciliation process, and provide real-time measurement solutions.

ABOUT THE AUTHOR
Terri Walter is VP-emerging media, with the New York City office of digital marketing company Razorfish.

The transition from sampling to real-time measurement
Currently there are many experiments within the TV industry to understand how real-time measurement from set-top box data relates to the audience metrics that the industry has been built upon. Through set-top box data like TiVo's Stop Watch, advertisers can now see -- down to the creative execution level -- exactly how many households watched their ads, when they did so (real time vs. delayed viewing) and at which point in the spot they tuned out. But beyond that, through data overlays, advertisers can also understand who these people are in the household -- their demographics and psychographics.

The personalization of the TV advertising experience
Cable companies and other interactive TV providers are working with technical-solution providers such as Visible World to enable creative executions to be personalized and on-the-fly, based on demographics, geography, weather and so forth. Imagine the elements of your TV spot (lead character, featured product, setting) changing via the targeting process based on region, gender, age, time of day and weather conditions. While this has been possible for years, we should see more personalization of advertising among large brands as Project Canoe rolls this out uniformly across providers.

The socialization of TV
Social networks, instant messaging, blogs and RSS are not just changing how consumers interact with websites and each other; they are also altering video consumption. CNN's incorporation of Facebook Connect during President Obama's inauguration in January created quite a stir. For the first time, users could watch live TV online with their Facebook friends, chat while viewing and enjoy a real time, social experience around Internet TV. With new platforms launching like Yahoo Connected TV which bring widgets to the TV screen, or social living room experiences like Xbox supporting multiplayer games, contests and video content, it is only a matter of time before TV goes social.

The ubiquity of content
Nothing defines what TV was and what it will be as specifically as the word "content." As we see advances in technology increasingly enable mobile video and content in the cloud, or new business models like Slingbox, Hava and Boxee, that break down the conventions and gateways we have in place around accessing content, the definition of television will continue to change. In fact, the word "television" will eventually mean something new -- it will need to move beyond the platform itself. It is important to understand how convergence may affect the media ecosystem and the business models that the TV advertising community operates around. Technology will continue to change how consumers access and consume content, but unless advertising models continue to evolve as well -- particularly as a means to fund the development and distribution of premium content -- we may be at risk of losing premium content altogether.

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