The evolving world of VOD is expanding beyond forward-thinking cable networks. There's Apple Computer, whose latest-generation iPod plays video, and magazine publishing giant Meredith Corp., last week unveiling an ad-supported VOD service tied to American Baby.
And on the content side, VOD ranges from pro sports to diapers. Witness the launch this month of Driver TV, created by ad production company Radical Media. The channel, being distributed by three top cable operators, already has the backing of General Motors Corp. The auto giant, along with others in the sector, is providing much of the content. The project is in addition to GM's ongoing VOD trials with Comcast Corp. in the Philadelphia market, involving footage from the annual auto show.
"Driver TV is a VOD channel for consumers," says Jon Kamen, one of its creators. "We are launching with 21 million households on Comcast, Time Warner and Cox systems. ... This is a concept that will grow and build."
Marketers have also been keen to support the year-old NFL Network On Demand. Among them are Miller Brewing Co., Procter & Gamble Co., Burger King Corp. and Microsoft Corp.'s Xbox. The National Football League's VOD service is priced as a premium product, says a league spokesman. Costs per thousand viewers are five times higher for the league's uncluttered VOD environment than for its established cable channel. "There is not enough ad inventory," the spokesman says. "We're not going to stray away from our model [by adding more spots]. ... Its 100% measurable."
Miller Brewing is the exclusive beer category advertiser of "NFL Replay," a 10-15 minute VOD show, while P&G, one of the most significant advertisers backing VOD, is using the NFL platform for razor products and Prilosec OTC.
SUPER BOWL SPOT COMPENDIUM
Marketers are already being offered the opportunity to showcase their Super Bowl ads on the VOD service. For the first time, the NFL is working with marketers to create a special On Demand show featuring only Super Bowl spots.
Elusive, tech-savvy men are not the only VOD target consumer. Kimberly-Clark Corp. last month signed to promote Huggies and Pull-Ups on PBS Kids Sprout, a Comcast VOD and cable service providing 50 hours of kids programming a day. Kimberly-Clark's VOD ads direct viewers to huggiesbabynetwork.com.
"The VOD universe is still small," says Jason Maltby, president and co-executive director of national broadcast at MindShare, Kimberly-Clark's media agency. "But it is growing. People are being a bit more adventurous."
Cable system operators are expanding their own VOD products to gain more marketer dollars. Time Warner Cable plans to launch Movie Trailers On Demand in the fourth quarter. Larry Fischer, president-media sales at TWC, says that while Warner Bros. might not buy the Albany, N.Y., area because it isn't a top 10 media market, the studio might buy a spot on Movie Trailers On Demand because it's targeted to moviegoers.
When asked about other VOD programming ventures, Mr. Fischer responds: "We're also thinking about travel, fantasy destinations."
The VOD business model remains in flux for all parties, Mr. Fischer says, adding, "We're at the top of the first inning. It's still early in the game, and we've got a lot to learn about pricing and what's going to resonate with subscribers. Autos and movies are things they like."
Marketers and their agencies are providing creative in all shapes and sizes, from short spots to long-form programming. Aiming to gain some coherence is the IDIA Group, a cross-industry association promoting cooperation on creative standards and measurement metrics. The group, whose initials stand for Innovation in Digital Advertising, met this month to discuss getting creative agencies involved in thinking about how to best operate in the VOD realm.
Andrew Keller, creative director at Crispin Porter & Bogusky, has helped create VOD ads for Burger King. The Miami agency set up a fight between two mock chickens, "Spicy" and "T.C." (for Tender Crisp), that was screened online and on Cox Communications's VOD platform.
"Part of it is simply innovation," Mr. Keller says. "Brands benefit from feeling fresh if they are first to market in these new areas. It is a good place for some of our brands to be. But that dries up if people abuse it ... It can get diluted."
The gaping absence of broadcast network shows on VOD is another stumbling block. "People are trying to convince advertisers that there's long-term value in VOD without an adequate measurement system. ... Until you can convince [major media conglomerates] that they are not cannibalizing their own advertising revenue, we are not going to see it grow much," says Mike Paxton, a senior analyst covering converging markets at In-Stat.
Nielsen Media Research indicates that many of its clients, the biggest of which are the broadcast network groups, want to see time-shifted viewing folded back into seven-day ratings before they commit.
STILL SMALL NUMBERS
"We know 20% of our syndicated panel of 9,000 households can access VOD. In prime time in any given month, all VOD usage put together would equal a 0.15 rating," says Sara Erichson, general manager-national TV ratings at Nielsen. That's equivalent to say a spot on a small cable channel or around 150,000 households.
"Folks like Comcast and the programmers are saying to Nielsen, `If we begin to use VOD as a platform to time-shift say "CSI" or "The Amazing Race," you must be able to fold it back into the ratings,' " she says.
Ms. Erichson says her clients are saying they're not going to make deals until the infrastructure is created. Nielsen next February begins rolling out active/passive meters that can track VOD viewing. The rollout is expected to be a two-year process. Nielsen also has a separate product under its Nielsen Entertainment division that will track actual VOD transactions.
"Our presence forces everyone to get on the same page," says Andy Wing, president-CEO of Nielsen Entertainment. "Who's consuming on-demand programming? We can do that internationally."
However, Pat Dunbar, a co-founder of IDIA, says: "We need common and consistent measurement. That still stands in the way of progress."
Nielsen is not alone in measuring VOD. Rentrak, a Portland, Ore.-based company, signed a deal this month to provide on-demand program data to an additional group of clients-Paramount Studios, CBS, MTV, Nickelodeon, Noggin, The N, Comedy Central, VH1 and "future on -demand network offerings," according to a Rentrak news release. Other new clients include Expo TV, National Geographic Channel, NFL Network and RipeTV. Rentrak already provides VOD usage data to Music Choice.
NBC Universal Cable has already identified programming that it would be willing to make available in the first phase of rolling out a premium VOD offering, says J.B. Perrette, senior VP-new media and chief financial officer. It would include "Law & Order: Criminal Intent," "The Office," "Las Vegas" and some of its top-tier cable content.
He admits there's an impasse with the cable operators over the issue of who pays for rights. "We're standing at the bridge, and there's a gap," Mr. Perrette says. "A business model is lacking. We're sitting on costs we don't want to eat and they don't want to pay, and therein lies the challenge."
Nevertheless, NBC Universal is sufficiently convinced that there's some juice to be had from VOD that it's upping the amount of Spanish-language content it's making available, with more VOD episodes of Jerry Springer-style show "Laura Sin Censura." In addition, NBC already has much of its weekly news programming on VOD platforms.
"Our local news group will do things on mortgages in Philadelphia," Mr. Perrette says. "We see continuing buy rates as the universe grows."
Having advertisers step in and provide a new revenue stream for both sides would appear to be at least part of the answer. However, Alec Gerster, CEO at media agency Initiative, notes: "We've been looking at this for two years, and there's been a lot of money invested in the cable side. We should make it a rich area. We don't want the advertising off in the left-hand corner of the screen."