TV Advertisers are Scared Shitless

TV is going digital and as Get Shouty has been quick to point out in session after session here at AdTech San Francisco, "programming is dead."  She is not alone as many of the panelist are talking about how advertising and media must work to stay relevant.

A lot of the convention has revolved around the changes afoot in the television industry.  Everyone appears to be struggling with how to monetize and extend their programming into and across digital channels. Here is a wonderful example of how ABC is allowing for property experiences that blur the line between channels.

[embedded Jimmy/Ben Affleck video]

A funny video, no doubt, and one that perfectly illustrates the potential for overlap between channels.  Jimmy Kimmel plays a YouTube video live on the air that his girlfriend created.  Jimmy then launches a counter video on YouTube.  All of this is then recorded and uploaded back to YouTube.  But what is the value of this?  Is it scalable?  Does that matter?

Based on the Jimmy Kimmel example, I could go so far as to say ABC/Disney gets it, but do they?  ABC allows for short snippets to appear on YouTube. For full length episodes, users have to go to ABC.com.  This is the case with all the networks, isn't it?

The current media star of cross channel TV appears to be NBC by all the press it's getting.  In early March, the NY Times reported NBC's launch of Hulu was finally ready for primetime. NBC has entered the fray with advertising supported full length episodes of their TV entertainment properties. Originally a venture of NBC and Fox, hulu has grown with content commitments from Warner Brothers, Lionsgate, highlights from NBA and NHL along with full NCAA basketball games.

Cut to yesterday where it was standing room only for the AdTech San Francisco keynote by George Kliavkoff, Chief Digital Officer of NBC Universal.

Unlike ABC, NBC is using hulu for displaying content from partners in addition to NBC properties.   Pretty cool, but what what really impressed me is that NBC is using hulu to manage their digital distribution deals. George stated very clearly that they built hulu with the mandate that people should not and likely would not come to hulu.  Rather, it's about getting hulu media onto other sites that people are already visiting.  To that point, hulu currently distributes their work via MSN, Yahoo, Fancast, AOL and Myspace.

It is awesome to see that hulu is not just talk in this regard. They are enabling their members to be part of the distribution channel as well.  They are allowing viewers to easily embed clips or even entire episodes on their blogs, personal pages or elsewhere. The embedded show will play the pre-roll or in-roll ads.

What? Ads on my blog or MySpace page if I embed a hulu tv show? Yes.  hulu is clearly ad supported and potentially quite successful in that regard. George is on record at AdTech saying NBC has made a billion dollars in digital sales in 2007 with strong profit margins that are continuing to climb. 

Thanks to Ryan Barrett for this clip from the NBC Keynote.  The moderator Adam Lashinsky was tireless and puts George on the spot repeatedly for pulling all their TV entertainment content off iTunes.

[embedded video]

"Crown Jewels", George?  George tries to imply that NBC is not on iTunes because they desire to control the wholesale pricing.  But the Adam is quick to point out that NBC is happy to sell feature length movies via iTunes. Why not a TV show???

The George K comments debate

Everyone is talking about George K and his comments.  And everyone wants to know what he is talking about.  Why aren't they on iTunes?  Well, here it is in plain text.  NBC is scared SHITLESS about piracy because advertisers don't want to pay money to attach themselves to something that is available without ads for free.

Okay.  So NBC has to take a harsh line and prove to advertisers that online is a safe environment worth paying to play. So why single out iTunes?  Simple.  George K gives us the answer on a platter.

iTunes does not attempt to sniff the items you play to verify they are legitimated copies.  iTunes is not going around behind your back and reporting on your "illicit" behavior.  Rather, Apple just focuses on protecting what you buy via iTunes.  Evil.  I know.

So what about viewership growth, George?  A few minutes later, George was quick to tout the results of a study where NBC showed that when people watch content on hulu it drives significant growth in traditional TV viewers on next weeks time slot. So what's the big deal if there's a bit of piracy?

All in all, hulu is pretty amazing.  Most critiques of hulu pretty quick to zero in on quality or lack of content.  Quality is a given.  If the quality is lower people are less likely to pirate the show and the costs to stream it are lower. But why limit content on hulu?  The NY Times article at the top of this post inferred that content producers are currently protecting themselves from perceived risk by limiting the amount of content availability online.  Logging into Hulu today, little has changed on this front.  There is a very limited library of past shows available.

So NBC has their hands full.  They have to prove themselves to advertisers and even content producers (internal and otherwise.)  As we speak, they are working on launching NBC Direct which will be a locked down DRM (Digital Rights Management) solution that allows for high resolution show viewing (with ads or purchased was not clear). The platform will limit how many shows you can have at any one time and will only allow you to view said shows on the machine you download it to.

Consumers forcing the shift to digital

Digg Nation has 250,000 subscribers a week, are selective about who can advertise and go out of their way to embrace new devices and formats.  Kevin Rose was very clear in stating that they want viewers to be able to watch the show (and the embedded ads) "where they want, when they want and how they want."  Ask a Ninja has over 500,000 subscribers (viewers) a week.  Both of these properties are among a growing list of non-traditional shows ONLY available online/digitally.

While traditional properties and distributors are struggling with renegotiating international rights for digital distribution, new players are moving in fast and hard. Someone please explain to me how Microsoft was able to allow for movie rentals and downloads on the XBOX 360 platform and apparently offer this service across international barriers.  I wish Apple TV was paying attention on that front as my device is basically a coffee mug warmer in Canada.

In cases where properties believe they are deploying traditionally, consumers now have the option of forcing digital on the channel/show. Todd Juenger from TiVo points out that 75% to 80% of prime time shows like Grace Anatomy are being time shifted.  In the case of Grace Anatomy, 70% to 75% of viewers time shifting the show are skipping the ads. 

What makes the difference between a commercial that people skip or fast forward and one they dont?  TiVo guy kept mentioning statistics but sadly gave none.  This fact is likely either unknown or worth a lot of money.

Summary

Time and again I am forced to witness the media channels defining audience needs based on the needs of advertisers.  So much in the advertising space is about what is less offensive or what is "hot" right now as determined by what the agencies and brands want to buy.  I heard this in the TV 3.0 panel every time the woman from Turner Entertainment Ad Sales spoke. 

It was neat, therefore, to see her viewpoint countered by people like Kenneth Estenson from ABC who spoke about what they are learning by watching how, when and where younger generations are interacting with TV properties.

NBC shows they understand that it is about expanding content reach, not driving people to a portal.  They are also struggling with getting a lot of diverse players comfortable and willing to play. In the meantime, Hulu has become a powerful distribution channel for NBC and a way for viewers to interact with shows on their terms. 

But is it as rosy a picture as NBC is painting? For example, are media sales still being thrown in as value add to a traditional buy?  Is avoiding iTunes really worth the cost of the loss of reach to iPod devices?