The Transformation of Video on Demand

Let’s take a break from “engagement” to talk about another interesting aspect of television—how Video on Demand (VOD) is changing. Rentrak has published a “State of VOD: Trend Report” for several years now. (You can order a copy at Rentrak.com/SVOD.) One thing that clearly stands out in this year’s report is that popular TV programs are becoming the mainstay of VOD.

First, a little explanation of the jargon (every industry has to have its own). “Subscription Video on Demand” (SVOD) refers to On Demand content from pay cable services such as HBO, Showtime, Epix, etc. Most operators (or in the true inside lingo: Multichannel Video Programming Distributors or MVPDs) give pay cable channel subscribers the ability to watch their movies and programs On Demand, so a subscriber can catch “True Detective” on HBO On Demand, or “Hunger Games” on Epix On Demand.

“Transactional on Demand” (TOD) refers to movies or events paid for by a household. As an example, a MVPD will make a movie like “Frozen” available On Demand several months after it has been in the theaters. The viewer then has to pay to watch the movie (usually within a window of 24 hours after ordering). TOD content is really what the MVPDs thought VOD was going to be all about— generating income from movies, events… and porn (oops, make that “Adult Content”).

There is also the “TV Entertainment” category. This category consists of the most popular TV shows, across all dayparts, which broadcast and cable networks make available On Demand, including current (and sometimes past) series or seasons.

Finally, there is all other “Free on Demand” (FOD) content, which refers to all other free programs, including some specifically made to air On Demand, Music on Demand, and a variety of other niche programs.

So with the lingo under our belts, let’s go back to the days of yesteryear (2010) and see what VOD looked like then. The chart below shows the share of viewing hours accounted for by each type of VOD described above in 2010.

VOD-2010

In 2010, “Subscription Video on Demand” had the largest share of viewing hours, followed closely by “Other Free VOD.” “TV Entertainment” was a distant third, and Transactional on Demand trailed in fourth place.

Now, let’s shoot forward to last year, to see a drastically changed picture. Again, we are looking at share of viewing hours by type of VOD format, this time in 2013.

VOD-2013

There is a dramatic change. The cable and broadcast network’s “TV Entertainment” category is now number one, at 35% share of hours. “Other Free VOD” edges out “Subscription Video on Demand” by a hair, and “Transactional on Demand” remains in fourth place, slipping to only 10% of hours.

Share is one thing, but one also needs to consider the absolute growth in VOD. The total number of VOD hours watched was 3.6 billion in 2010 growing to 4.5 billion in 2013, an overall growth rate of 25%. But that growth rate was by no means even as indicated in the chart below, which lays out the percentage growth in hours by type of VOD format.

VOD-GrowthDecline

You can see that the popular shows in “TV Entertainment” grew by over 120%. “Other Free VOD” grew by 10% while time spent viewing “TOD” and “SVOD” fell in the 3% range. However, Rentrak’s Digital Download Industry Service reports that revenue for OTT movies (purchased) has grown by 124% since 2010. So demand to watch movies at home has not fallen, rather the supply has grown with OTT options.

Why has viewing of “TV Entertainment” grown so much? Again, supply is a big factor. In the fall of 2013, the networks and MVPDs worked together to make available more than the traditional four most recent episodes of popular series to each household. When more programming options are available, the audience will come. Or as Willie Sutton, the famous bank robber, said in response to the question, “Why do you rob banks?”: “Because that is where the money is.”

And advertisers are starting to go where the audience is. Rentrak estimates that there is a potential multi-billion dollar business in VOD advertising, just with digitally inserted pre-roll ads. Those and other details can be found in the full “State of VOD: Trend Report 2013,” which you can learn more about by clicking here.

In case you don’t know, I am Bruce Goerlich, Chief Research Officer at Rentrak, the global standard in movie measurement and your TV Everywhere measurement and research company. I have been in the research end of the marketing business for more than 30 years primarily on the ad agency side, with my last stint prior to Rentrak in the role of President, Strategic Resources Zenith Optimedia North America. Somewhere along the way I morphed from young Turk to old fogey. Now that I have grey hair and am horizontally-challenged, I can speak with some authority on advertising and research issues – which I will do from time-to-time on this blog.

What’s Engaging about Cable?

Well, I won’t have done too badly this Lent. I will have posted two blogs.

As promised, I am continuing to write about TV “engagement.” In the last blog, I focused on broadcast TV programs. In this piece, I look at ad-supported cable network programs. As I said before, the definition of “engagement” deals with time spent viewing, or “stickiness.” Rentrak looks at the average percentage of a program watched. This form of “engagement” is good, because studies have shown that if two people watch a half hour program that has an ad in the first 15 minutes, if one person just watches the first 15 minutes, and the other watches the full half hour, the half hour viewer is much more likely to recall the ad. Programs with audiences that “stick to them” give a positive benefit to their advertisers.

I looked at data from Rentrak’s weekly reports on “engagement” for 2013. You should also know that Multichannel News is now publishing our reports in advance in their print edition. (Visit Multichannel.com to get more information.) And you can send me an email at bruce.goerlich@rentrak.com if you want to get on the Rentrak mailing list.

Like in my broadcast post, I first took a look at the distribution of shows by genre.

Percentage of Ad-Supported Cable Shows

 

As with broadcast, Drama and Reality genres dominate the most engaged programs. However, cable’s share of top engaged Dramas is 43%, compared to broadcast’s 67%. What makes up the difference in cable? Ad-supported cable reality shows are at 34% compared to 16% on broadcast. (Thank you, “Basketball Wives,” “Braxton Family Values,” “Duck Dynasty,” “Project Runway,” etc.).

Another big difference with ad-supported cable consists of the importance of the Movie and Mini-Series categories. These genres still show up on cable, and viewers like and are engaged with them. Many of these are originals, as well as old favorites.

One way that broadcast and cable programs are exactly alike is that there is no relationship between the rating and “engagement”/”stickiness.” The chart below takes all the ad-supported cable shows in our 2013 reports and plots them on the vertical axis for “stickiness,” and on the horizontal for ratings rank. No relationship exists. A low rated program can be very engaging.

Comparison of Stickiness & Ratings for Ad-Supported Cable Networks

And, as with Broadcast, this additional leverage from looking at a measure of “engagement” is a good thing. Both sides of the desk can use the leverage when it serves their interest.

Next up, what you didn’t know about the State of Video on Demand.

In case you don’t know, I am Bruce Goerlich, Chief Research Officer at Rentrak, the global standard in movie measurement and your TV Everywhere measurement and research company. I have been in the research end of the marketing business for more than 30 years primarily on the ad agency side, with my last stint prior to Rentrak in the role of President, Strategic Resources Zenith Optimedia North America. Somewhere along the way I morphed from young Turk to old fogey. Now that I have grey hair and am horizontally-challenged, I can speak with some authority on advertising and research issues – which I will do from time-to-time on this blog.

What’s Engaging about TV Programs?

It’s been a busy couple of months, and I haven’t had a chance to write. So, as part of my Lenten discipline, I promise more timely blogs. I’m going to devote the next couple to looking at “engagement” in national TV programs.

“Engagement” is one of those words like “freedom.” Everybody is for it, everybody thinks it’s good, but there isn’t a single definition that everybody agrees on. At Rentrak we have two measures for “engagement.” The first one, which this piece is based on, deals with time spent viewing, or “stickiness.” That is, what is the average percentage of a program that is watched? This form of “engagement” is good, because studies have shown that if two people watch a half hour program that has an ad in the first 15 minutes, if one person just watches the first 15 minutes, and the other watches the full half hour, the half hour viewer is much more likely to recall the ad. (Frank Harrison at Zenith-Optimedia did some very good work in this area.) Therefore, programs with audiences that “stick to them” give a positive benefit to their advertisers.

I looked at Rentrak’s weekly reports on “engagement” for 2013 for both broadcast and cable programs. (Contact me if you want to get on the mailing list.) In this post, I am going to concentrate on broadcast. In the next blog, I’ll move on to cable, and then on to our second definition of “engagement” which involves social media.

A couple of interesting things pop out when we look at the “stickiest” shows for 2013, as the chart below shows.

Rentrak Stickines Index

First off, dramas are the kings of “stickiness.”* From cop shows to novellas, the audience stays throughout them. Over two thirds of the most engaging shows last year were dramas, where people like to stay around and see what happens. Storytelling goes back to our ancestral roots when we huddled around the fire in caves while the Shaman told tales of the battles between good and evil. And today, dramas provide a real benefit to advertisers.

Reality shows are second (please forgive me network clients), but they really are just dramas done on the cheap. Contests, where viewers want to find out who wins, are third, and the same phenomenon follows for sports. Although awards shows are not often in the top rankings, which is in large part because there aren’t that many of them in broadcast. We do know, however, that the big ones are there: “The Academy Awards,” “The Golden Globes,” “The Grammy Awards,” etc.

Another interesting fact about “stickiness” is the high proportion of Hispanic network programs that show up. Overall, 32 percent of the broadcast programs that showed up were Hispanic, but that percentage differed by genre as the graph below demonstrates.

Rentrak Stickiness Index

The categories where Hispanic programs did especially well were News, Review (e.g. movie and TV show reviews), Talk Shows, Variety and Awards shows. It should also be noted that in the largest “stickiness” category of dramas, 34% were Hispanic programs; the novellas hold their audience.

One final note, there is no direct relationship between “stickiness” and program rating. Rentrak’s weekly top “stickiness” report looks at the top 20 “stickiest” broadcast shows. Across the year, only 46 percent of the top 20 “stickiest” shows were also in the top 20 highest rated shows of that week. In short, a high rating does not guarantee a high level of “stickiness,” and a high level of “stickiness” doesn’t guarantee a high rating.

And I think that is a good thing. Both networks and advertisers need more than one metric to value a program. Sheer audience level is good, but so is a measure of “engagement.” Both sides can use these as leverage points in negotiations. And finding leverage is what media is all about.

Soon to follow will be a look at “stickiness” and cable programs.

_ _

In case you don’t know, I am Bruce Goerlich, Chief Research Officer at Rentrak, the global standard in movie measurement and your TV Everywhere measurement and research company. I have been in the research end of the marketing business for more than 30 years primarily on the ad agency side, with my last stint prior to Rentrak in the role of President, Strategic Resources Zenith Optimedia North America. Somewhere along the way I morphed from young Turk to old fogey. Now that I have grey hair and am horizontally-challenged, I can speak with some authority on advertising and research issues – which I will do from time-to-time on this blog.

*The technical level of “stickiness” is determined by level of variance between average percentage viewed of the telecast to that of all telecasts of the same duration during Monday-Saturday primetime (8-11 p.m.) and Sunday primetime (7-11 p.m.).

Local TV News: The Solid Medium

I love new electronic toys. They make life easier. Last week, some of my staff members were giving me weird looks as I spoke my IMs. That is, I used the Google voice function on my Droid to write out an instant message rather than typing it. If you ever get any of my text messages, you would know why I like to be able to not use my heavy-handed thumbs to punch out my missives.

But I wonder if the media technologist in all of you (and in me) can become too in love with technology and not recognize the solid delivery that traditional media can provide. Take local news, for example. Traditionally, in the 156 markets that are served by a diary sample issued four times a year, the value of local news can be misunderstood, because it isn’t measured well. First off, numbers bounce all over the place and secondly, there aren’t many numbers at all. The nice thing about the return path data that Rentrak employs is the continuous and large footprint. This means stability and granularity.

Take Rochester, New York, a local market that is in the top 80, where Rentrak has approximately 12,000 homes reporting every day. If we look at the first quarter of this year, for the daily household ratings for Monday through Friday news, we see a very stable pattern across the entire quarter for two local stations. In fact, both the high rated and lower rated stations shown below have the same very low level of statistical variation of <10%. (The coefficient of variation—email me and I’ll explain it.)

Daily M-F News at 6 Chart

And that stability isn’t just something that happened in one quarter. Look at the same quarter in 2012. The rating levels of the two stations have the same stability, and are very close to what they achieved in 2013.

News at 6 Chart

This continuous, solid delivery is not to be taken lightly. Media plans for core targets (of which there are many—I use toilet paper and I hope you do, too) need a strong base from which to build. Local news isn’t a bad place to start from a reach perspective. They provide large audiences, without much duplication between them. The interesting thing is, the news programs do move in tandem, when there are big (or small) news stories, the stations’ ratings track each other as shown below.

Daily M-F News at 6 Chart

Local news can also deliver narrower segments, including online buyers. Rentrak has merged its viewing data with MasterCard’s purchase segments. And, as seen below, a news series can perform well (or at average) in broad categories like grocery shopping and fine dining, and can index higher for Black Friday shopping both on and offline, as well as for very high spenders for Holiday shopping. Something to remember at this time of year.

Index of Top Spending by MasterCard Categories Chart

So, the relatively low-tech medium of local news delivers a substantial audience day in and day out, provides reach, reflects what is (or isn’t) interesting to the local community, and can deliver traditional, and online buyers. I believe that solid delivery can help form the broad base of a media strategy.

Now back to the toys!

In case you don’t know, I am Bruce Goerlich, Chief Research Officer at Rentrak, the global standard in movie measurement and your TV Everywhere measurement and research company. I have been in the research end of the marketing business for more than 30 years primarily on the ad agency side, with my last stint prior to Rentrak in the role of President, Strategic Resources Zenith Optimedia North America. Somewhere along the way I morphed from young Turk to old fogey. Now that I have grey hair and am horizontally-challenged, I can speak with some authority on advertising and research issues – which I will do from time-to-time on this blog.

Video On Demand: How to Create an Advertising Marketplace

Video On Demand (VOD), viewed via one’s cable or satellite box, is a rapidly growing medium, particularly for programming from broadcast and cable networks called Free On Demand or FOD for short. Rentrak is the industry’s source for FOD information. For YTD 2013, there were more than 9 billion total VOD viewing occasions (e.g. clicking the button to watch VOD) and 78 percent of those were for FOD. While VOD in total grew 30 percent between 2009 and 2013, FOD grew by 70 percent. Rentrak performed research indicating that a pre-roll ad in FOD has about a 120 index to the program rating. FOD viewers are also engaged since they are making a very specific and deliberate action to select and watch a show.

The largest part of FOD now consists of programs from the major broadcast and cable networks. Some of these content providers are now porting over the same ads that ran when the shows aired on regular or “linear” TV. Some are switching the ads out after four days to fit the traditional “C3” model. The content providers realize that over 78 percent of viewing to major broadcast and cable network shows happens after three days, so there is value in that ad inventory after four days, whether or not the ad copy is the same.

So why isn’t FOD programming chock full of ads?

Some of the reason has been technical. There was not an easy way to insert specific ads into FOD programs; it was akin to the old fashioned magazine business where the copy had to be ready two months prior to print. With digital ad insertion, and other technological fixes that problem has been significantly (but not completely) overcome.

But there is a deeper reason for the failure for advertising to take off. It goes back to the start of VOD reporting over eight years ago. Rentrak, with its history of managing and integrating massive amounts of data through its movie and DVD reporting services, with user-friendly systems that generate insights, became the operators’ choice to provide measurement. Rentrak’s measurement is a complete census. Every transaction/order from every provider of VOD in the United States is captured.

At the time of the creation of VOD, the cable operators thought that the bulk of VOD would be consumers ordering and paying for movies (both major studio releases as well as adult films). They also thought that consumers would like to be able to see regular TV programs when they wanted to, akin to what DVRs can do.

And at that time, the satellite companies could not deliver VOD, so the cable operators also thought that offering VOD would be a way to help hold on to customers. So the operators asked the broadcast and cable networks if program content could be loaded up to create FOD. The content providers agreed, but they had concerns about cannibalization of the audience from the main linear TV platform, as well as not having full strategies in place on how to generate revenue via advertising. The agreements became that a cable network could see its own shows (e.g. A&E can see A&E across all operators), or an individual cable operator could see how shows did within its own footprint (e.g. Time Warner can see how NBC and CBS perform within Time Warner’s footprint), but that was the extent of the transparency. Each “side” could see its own numbers, but the complete picture could not be revealed. In short, Rentrak’s census-level measurement was put into a straightjacket; only limited slices of the data could be shared with limited parties.

As anyone who has taken Economics 101 knows, for a marketplace to exist there has to be transparency. Right now, advertisers who want to see how programs might perform on VOD have to go ask each network for their numbers. In a world of shrinking advertising staffs, and the push to programmatic buying, there is not much willingness to enact business by making tons of phone calls and cobbling together numbers in Excel spreadsheets.

Therefore, transparency is needed. There has to be the full reporting of VOD programs by title in detail for C3 and up to 28-day levels. Only Rentrak with its census-based measurement can provide these numbers in a granular and stable manner. We are moving in this direction. Over 60 cable networks now allow us to produce a report showing monthly average transactions. (For insight into what that report can provide, check out my last blog. To order the report, contact Gordon Jones at Gordon.Jones@rentrak.com). And now we have a monthly series-level report for eight participating cable networks. These series-level FOD metrics now feed into our Total TV Audience report.

So, if a true ad marketplace in FOD is going to be created, full transparency must happen. I urge all the readers of this article who want to use the huge potential of VOD for advertising to contact their sales reps—no, go higher, and contact the sales heads of the networks you do business with and demand, “I want my FOD! Set Rentrak free!”

Exciting News on VOD Performance by Network

Video on Demand (VOD) is a rapidly growing form of television. The excitement comes from its double-digit growth, particularly in the “TV Entertainment” category, which consists of free programming put up by the traditional broadcast and cable networks, as well as VOD-only networks. Viewers are finding out that their favorite programs don’t have to be DVR’d, and that when a friend mentions a new show, more often than not, it can be found On Demand.

The VOD industry is also moving in an exciting direction to start sharing data. Rentrak has been producing a “Transparency Report” since January 2012. Forty-eight cable networks first agreed to allow monthly data to be shown. That number has grown to more than 60 cable networks. (As I write this, there are no broadcast networks participating.) I thought my loyal fan base (including the guy with the court order to stay back 500 feet) would be interested in a top line peek.

I first took all the 2012 reporting VOD networks and averaged their results over the first half of 2012. I then graphed them out by what is important to media planners and buyers—reach and frequency. Reach is important because it determines the breadth of the target audience. Frequency is important because it reflects how often ads can be delivered.

In the graph below, the horizontal axis is the average monthly reach, or unique set-top boxes that watched a program on a network. The vertical axis is the average number of times a network was watched per month. The intersection of the two axes is at their respective averages, creating a quadrant map. I’ve labeled the networks that have both high reach and high frequency; they are the ones in the upper right-hand quadrant.

Average Reach & Frequency for VOD by Network

Clearly, Music Choice is a strong outlier, with an average frequency more than four times higher than other networks. The video music format obviously is a big draw for repeat viewing. Also interesting to note is the presence of kid’s networks like Nick Jr., Cartoon Network, and Nickelodeon. Children are “early adopters,” and are masters of the push button (and screen swipe). A&E, TruTV, TBS and Comedy Central round out the quadrant.

However, the picture changes a bit if we look at another key metric—time. The quadrant map below looks at the same networks but has the number of minutes a network was watched on the vertical axis. While the three children’s networks stay in the upper right quadrant, Music Choice slips to the edge. Music Choice, because it is a short form genre, obviously could have many viewers and a lot of frequency yet less dominance in time spent. More networks with longer formatted programs join the quadrant: AMC, History Channel, Impact, Lifetime, MTV, TLC, TNT and VH1. Comedy Central stays on the edge of the quadrant.

Average Reach & Time Spent Viewing for VOD by Network

I’d be a bad researcher if I said this is a definitive look at VOD. Not all networks have agreed to be transparent, and I haven’t even shared with you all the networks we do have data on.

Finally, when you think about those millions of VOD viewers, just waiting for someone to put in a super impactful pre-roll ad as they settle into watch the program they have deliberately decided to engage with, doesn’t the ad man (person) in you salivate? I know I do! And these Rentrak transparency reports will help build the marketplace to make it happen.

More information on VOD can be found in Rentrak’s State of VOD: Trend Report and monthly transparency reports. Please contact Gordon Jones, Rentrak’s VP, OnDemand Everywhere, at gordon.jones@rentrak.com if you are interested in either of these reports.

In case you don’t know, I am Bruce Goerlich, Chief Research Officer at Rentrak, the global standard in movie measurement and your TV Everywhere measurement and research company. I have been in the research end of the marketing business for more than 30 years primarily on the ad agency side, with my last stint prior to Rentrak in the role of President, Strategic Resources Zenith Optimedia North America. Somewhere along the way I morphed from young Turk to old fogey. Now that I have grey hair and am horizontally-challenged, I can speak with some authority on advertising and research issues – which I will do from time-to-time on this blog.

The Value of Media Leverage

I recommend a highly interesting review by Brian Wieser (brian@pvtl.com) of Pivotal Research Group on the announced merger of Publicis and Omnicom, as well as Facebook’s claim to be an effective ad medium because of its broad reach in daytime. In his analysis, Brian makes the point that reach by time of day is not the key factor in media planning—the intrinsic effectiveness and cost of the media come first. That is one reason for the Publicis OMD merger—to develop ways to buy online video at a cheaper rate.

But beyond that, Brian also makes this point:

“For a good illustration of how issues like the above play out elsewhere, consider: if marketers could identify the 20 percent of local markets that drive 80 percent of variations in outcomes, wouldn’t they spend more money on local media? It’s a potentially massively more efficient way to spend money, and one which marketers have had the capacity to execute against for many many years…and yet if anything marketers with nationally-skewed corporate structures have been shifting most of their spending towards national media over the same time. Consider that over the past ten years, national mass media owners’ advertising revenues grew by 33 percent while local mass media owners’ advertising revenues fell by 28 percent during the same time. Reasons unrelated to marketing efficiency usually have substantial sway in dictating changes in advertising spending choices across the economy.”

I believe effective media leverage is finding those media and those geographies where there are greater concentrations of product users that can be bought more efficiently—these are the key places to grow share. A simple example of this is the national election, where the Obama for America campaign advertised in only 44 TV markets (using Rentrak data).

The reality is that our country is becoming increasingly Balkanized, with different concentrations of cultures and economies in different parts of the country. The map below from Pew Research shows the importance of religion in people’s lives—the darker the color, the more important. The Northeast and West Coast are clearly different than the Deep South.

Map

This disparity extends to lifestyle and product usage as well. The map below from The Atlantic shows where the 1 percent is concentrated. Those products that cater to the more affluent (e.g. cars) need to consider the disparities in income that allow for people to purchase or lease cars.

Map 2Car manufactures have weaned themselves away from the incentive “drug” of the ‘90s causing an increase in the real price of automobiles adjusted for inflation as the chart from the Motoramic blog indicates.

US New Vehicle PricesThe increase in real car prices in the auto industry alone makes understanding the differences in sales across markets and within a medium even more important. Since Rentrak has the same measurement methodology across markets, we can provide comparable TV delivery indices across markets, unlike the sample-based folks who have different methods in different markets. Rentrak can also do this with actual auto sales information, as we have integrated Polk data across our footprint. In addition, within a market (and for the nation as a whole) we can indicate where to find the best TV leverage points for auto buyers. I leave you, dear reader, with a fun example of where to find the Cadillac buyer in Dallas in March in Early Fringe.

RentrakCadillac

I wasn’t a good media planner and I didn’t look at the all the networks and stations we report on. I used the major broadcast affiliates and a couple of cable networks. It isn’t just the news networks like CNBC and FNBC that index high against Cadillac buyers. Affiliates like CBS and MeTV also have high concentrations. Unfortunately, the few liberals in Dallas on MSNBC don’t seem to be lovers of Cadillacs.

Bottom line, Brian is right. Leverage in media can be found across markets, within markets, and across media. And Rentrak, with its Advanced Demographics can help with that leverage.

In case you don’t know, I am Bruce Goerlich, Chief Research Officer at Rentrak, the global standard in movie measurement and your TV Everywhere measurement and research company. I have been in the research end of the marketing business for more than 30 years primarily on the ad agency side, with my last stint prior to Rentrak in the role of President, Strategic Resources Zenith Optimedia North America. Somewhere along the way I morphed from young Turk to old fogey. Now that I have grey hair and am horizontally-challenged, I can speak with some authority on advertising and research issues – which I will do from time-to-time on this blog.