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| Just launched: Techwear |
| Just launched: Techwear |
Yesterday, I drove up to the NCTA in San Francisco to see how vendors are positioning themselves in television this year. As you might expect, IPTV-oriented companies are better represented. I also noted that the larger VOD systems providers are articulating their products better.
What particularly struck me was the lack of understanding of how advertising was going to play into the mix. I honestly don’t think the telecoms have even thought about this.
Today's linear television advertising market in the United States is $56 billion dollars. That is the money advertisers spent buying commercials on broadcast, cable networks, local television stations, and local cable in 2004. This huge pot of gold sustains many businesses in the television food chain – including those companies that create the television shows that (hopefully) viewers tune in to see.
In order to make that ad market work, there are very specific systems and institutions in place. For instance, there are agency planning tools, buyer-side proposal systems, ratings providers, rep firms, media sales automation tools, inventory analysis, national sales offices, traffic & billing applications, spot distribution, etc.
I have yet to find anyone in the IPTV marketplace that is aware of these requirements. In the VOD system providers, there is a little more awareness that these systems and institutions exist, but no planning of how to integrate to them. If I had to guess, it appears that each company is so busy trying to justify the core value of their technologies that advertising is defined as a requirement outside their system and one that the advertisers somehow will deal with.
My question is this: if the telecoms actually succeed in the television business, how are they going to integrate television advertisers into the mix? Telecom subscription based business models cannot cover the whole of television. In other words, the HBO and Showtime business model will not work for Animal Planet or the History Channel. If those fees were bundled into the telecom monthly subscription fee, there would still be a huge hole in the business model. Also, that high a monthly fee will make the offering non-competitive against cable.
The amount of potential money that can be earned from advertising is not trivial. Indeed, I would have thought that the geniuses in IPTV would have already pieced together that this revenue stream is the eventual golden egg that justifies the billions of dollars in capital upgrades and expenditures that telecoms like SBC are making.
A note: I will remind myself to write future articles about what telecoms might do to both (a) take advantage of their medium (that is, offer newer strategies of advertising that can only work on IPTV) and (b) sell that value proposition to the agencies that spend the real advertising dollars on behalf of their clients.