The internet is coming to your TV set, along with all the targeting and interactivity of digital media. This will make true Video on Demand (VOD) a reality and potentially replace traditional TV advertising models.

1. 23/10/2009
TV: The Internet Is Coming
TV: The Internet Is Coming
The Rise Of Video On Demand
(VOD)
Richard Dance & David Norris

2. 23/10/2009
[Client Logo] TV: The Internet Is Coming
Executive Summary
1. The internet is coming to your TV set, along with all the
targeting and interactivity of digital media. This will make
true Video on Demand (VOD) a reality and potentially replace
traditional TV advertising models.
2. SNAPSHOT: Yahoo! Connected TV is the dawn of TV becoming
“Internetised”.
3. Technology will not converge in an efficient manner. People
will continue to engage based on the content not the
technology platform.
4. Good content will always find a way to consumers’ screens, by
legitimate or other ways. Technology should be thought of as
a means of distribution rather than as an idea in itself.
5. With all this growing choice, communication can no longer
just interrupt consumers; the idea to be communicated must
be engaging and accessible via a number of formats, judged
on standard branding and effectiveness metrics.
6. Some opportunities and considerations for advertisers.

3. 23/10/2009
[Client Logo] TV: The Internet Is Coming
1. The internet is coming to your TV set, along with all the
targeting and interactivity of digital media. This will make true
Video on Demand (VOD) a reality and potentially replace
traditional TV advertising models.
Video on demand has been in development for years. From the moment audiences moved
from massed screen based entertainment (cinema) to private screens in their home
(Television) the trend has been towards greater choice, personalisation, and the transfer of
control to the individual. Developments such as multiple channels through the aerial, infra-
red remote controls, digital broadcasts, PVR’s, and now the internet have all conspired to
move the burden of responsibility from the corporation to the viewer and there are seven
broad themes that highlight the increasingly individual task to find TV entertainment and
information:
In today’s world, we see the next wave of developments taking shape – producers of
content (e.g. Endemol) vying with broadcasters (e.g. Sky), and infrastructure providers (e.g.
BT Vision) competing with hardware manufacturers (Apple, Sony, Nintendo) and software
companies (e.g. Microsoft). Even across this limited list of companies, the overlap they
have across these categories is obvious; consumer choice is expanding ever faster.
Moreover, viewers are changing their behaviour quicker than major corporations can
possibly adapt to. Content production is passing into the hands of consumers, with
cheaper and higher performance technology democratising what used to be a corporate
preserve.
As a sociological trend, this is interesting enough. But screen based entertainment
produces audiences, and audiences attract advertisers, and the disruptive change of the
past few years places mass reach advertising in jeopardy. Not that people are watching
less television; far from it. In part due to today’s economic situation, people around the
world are spending more time watching their TV; but the way they are watching is
becoming far more complex, and the efficiency of mass reach advertising is suffering.

4. 23/10/2009
[Client Logo] TV: The Internet Is Coming
Multitasking is becoming commonplace1, ad avoidance continues to grow, and perceptions
of brands continue to be threatened by consumer empowerment and tribalism. Faced with
this challenge, we need to continue to optimise linear, interruptive, standard advertising
models for as long as a return on investment can be proven, while simultaneously
developing insight and expertise in the new forms of marketing communication.
1
During the second quarter of 2009, more than half of Americans (57% Nielsen A2/M2 Three Screen Report) who have Internet access
at home use television and the Internet simultaneously at least once a month. Though this two-screen, simultaneous usage amounts to
just 3% of their TV viewing, it already represents more than a quarter of their at-home internet usage (28%).

5. 23/10/2009
[Client Logo] TV: The Internet Is Coming
2. Snapshot: Yahoo! Connected TV is the dawn of the TV becoming
Internetised
TV widgets on Yahoo! Connected TV enable the consumer to interact with web services
(such as Twitter, Facebook, instant messenger) while watching television, without the need
for a separate box. In the Yahoo! scenario world, the coveted space below the TV is no
longer occupied by decoders and PVRs. Everything can be accessed directly through your
TV. TV widgets combine the visually rich and engaging passive characteristics of television
with the personalised interactive elements of the internet. Thus Yahoo! hopes to be able to
deliver internet values to the TV experience.
Yahoo! has partnered with Samsung, Sony, LG and Vizio to provide this service, and
widgets are already available from Yahoo!, eBay, CBS, Flickr, USA Today, and Twitter.
Navigation via the television is personalized to the login details of the user – allowing
children and parents to have different sets of application, suited to their needs. These
apps can form part of the viewing experience, for example, you could watch your favourite
programmes and discuss them as you watch with friends via Twitter. The user set up is
simple, and it is live in the US already, with a Samsung launch set for end Q4 2009 across
Europe.

6. 23/10/2009
[Client Logo] TV: The Internet Is Coming
3. Technology will not converge in an efficient manner. People will
continue to engage based on the content, not the technology
platform.
As disruptive technologies go, the internet is about as big as they get: and television
entertainment is about to be ‘internetised’, as Yahoo! Connected TV demonstrates. Having
identified a number of different combatants on the VOD battlefield, it is clear that for
Yahoo! Connected TV offers a new technological development, but as the below highlights
there are always different technological elements that determine, but the key to achieving
success comes in the content that is delivered.
Technology, in the form of hardware and software, rarely converge, especially in the early
stages of development. The back of your PC, with numerous sockets and ports, is
testament to this. It’s probably already the case with the back of your TV too. Market
forces and the desire of companies lock in consumers with a competitive edge require
divergence, not convergence.
From this model, we can estimate no one technological platform will provide a
comprehensive VOD solution. Fragmentation of audiences will continue, with new divisions
emerging across hardware, software and broadcaster solutions. This could necessitate
multiple ad formats and programming solutions, without the advertiser ever achieving
incremental reach.

7. 23/10/2009
[Client Logo] TV: The Internet Is Coming
4. Good content will always find a way to consumers’ screens, by
legitimate or other ways. Technology should be thought of as a
means of distribution rather than as an idea in itself.
Recent history indicates the internetisation of home entertainment will transcend
restrictions imposed by technology. Evidence for this comes from the persistent success of
piracy in all forms, YouTube, torrents, open source video players such as VLC, and the
apparent ease with which digital rights management (DRM) controls can be circumvented
and hacked. Technology doesn’t converge; content does – despite strong corporate
interest in maintaining control over what content viewers can access. On the basis of these
two observations, and the previous section, we believe content is likely to be the biggest
deciding factor of this emerging battle, and it is in this area we recommend our clients
make the greatest exploratory investment.
However, we also expect to see a couple of interim phases, during which ‘portals’ of
content emerge, perhaps as part of the existing brand heritage of broadcaster channels. In
this scenario, a range of standard ads will be place alongside or intercut with content,
targeting people by behavioural characteristics. At the same time, examples like Yahoo!
IPTV show another foray into the desire to aggregate audiences.
To see content as a deciding factor in the emerging battle of the media plan we need to
address the different ways that content is now shown within the changing nature of media
consumption. Though TV offers quick mass reach and is still the optimum screen for big
live sporting, music and news events, the internet and mobile mean that online content is
rapidly increasing and becoming more important (with 26.9 million people viewing online
video content in April 2009). People are able to watch what they want when they want.
Mobile puts a screen into the hand of the consumer, and mobile will be the next area that
VOD technology will explode. With 3G penetration set to increase from 30% to 68% in 2010
– we could be set for the decade of mobile advancements, including VOD.
There are a number of VOD content opportunities, which can be set out across a spectrum,
from interruption to engagement:

8. 23/10/2009
[Client Logo] TV: The Internet Is Coming
Content needs to be suitable for all types of screen as the technological advances cannot
be utilized without placing content in the necessary environment. Greater consideration
needs to be taken when developing creative ideas and executions to work as well on a
mobile or on a big screen, and create bespoke content for each planned distribution
platform.

9. 23/10/2009
[Client Logo] TV: The Internet Is Coming
5. With all this choice, communication can no longer just interrupt
consumers; the idea to be communicated must be engaging and
applicable to a number of formats, judged on standard branding
and effectiveness metrics.
Brand communication needs to move from telling people what to think or buy, to
demonstrating the brand think like its target audience, or even have common beliefs with
you. Today, brands have to persuade consumers to buy or use their products and services.
Delivering content through VOD offers an ideal environment to achieve this, as it achieves
a greater level of attention than passively broadcast content.
The metrics that best indicate success have yet to be defined in this emerging sector;
however, looking at the range of data that we currently employ to prove the effectiveness
of internet-based digital campaigns, we can start to identify the data we will require from
content providers.
To determine which platform or technology is best suited to your project, standard media
planning techniques such as audience reach, user response data, and the innovation effect
of employing advanced technology need to be applied. In aligning with content rather than
the technology itself, a number of different means of transmission will be possible – in
each case, the costs of so doing needs to be understood.

10. 23/10/2009
[Client Logo] TV: The Internet Is Coming
6. Some opportunities and considerations for advertisers
The opportunities in this area have barely been defined, let alone proven. However, getting
in on this opportunity early gives brands a chance to learn without risking exposure when
audience sizes are higher. We see four areas that are worth exploring:
TV widgets and utilities
Apps are becoming commonplace in the mobile world, and brands are increasingly finding ways to
make this extended and intimate relationship with consumers with for both parties. These range
from functional apps, such as recipe and store locators, to leisure apps such as the iPint or the BMW
driving game. Apps on the TV offer a whole new dimension – the ability to bring quality content to
users (e.g. show people how the recipe is made, rather than present a list of instructions), and a
greater range of interactivity afforded by the bigger screen. Apps for the Yahoo! IPTV is made easier
by Yahoo! providing a development kit for coders, and this is a model most IPTV services are likely
to follow following it successful adoption by Apple for the iPhone and Google for their Android
phones.
It is also exciting as there is the potential to use the on screen AV content to link directly in to the
downloaded TV widget. For example, an application that has a feed of relevant and interesting live
statistics being flagged up, and linked to the TV creative that runs at half-time of a football match.
Search
Search has come to dominate the revenues of the internet, and the death of the TV listings page is
going to bring search to the fore in entertainment too. Why looks at a static list of programmes that
are being shown tonight, when you can select from a list of programmes based on your previous
viewing habits, or which your friends have recommended? Search will be one of the few points of
aggregation (ignoring ‘hero’ content such as major sporting, music or news events).
VOD content/bespoke programming
Advertiser funded programming struggles to gain traction in today’s broadcaster controlled TV
environment. In the IPTV world, this barrier is removed. Coupled with the possibility of making TV
in a non-linear form (allowing users to explore a video world and its side stories, and other
unforeseen potentials), Advertiser-funded VOD is a hugely important opportunity and area to gain
expertise in.
Addressable TV spots
Presently, the bedrock of internet targeting, the cookie, is not available on TVs (Nor incidentally is it
available on games consoles). When the TV has a cookie, advertisers can apply internet targeting
principles – frequency capping, sequential messaging, and behavioural targeting. Some
broadcasters, such as Sky, have a wealth of data on their subscribers – not just household size and
address, but through a panel system they can monitor the effectiveness of spot advertising on
peoples buying habits. It is only a matter of time before ad breaks are customised to the viewer; the
ads one household sees will be different to those their neighbor sees through the same broadcaster
feed. This development requires very little technological development, simply a change in the way
TV is delivered to your screen.
Interactive spots

11. 23/10/2009
[Client Logo] TV: The Internet Is Coming
The Red Button is a familiar fixture on UK multichannel homes. Pressing it leads a simple
‘dedicated advertiser location’ (DAL), which is rented from the broadcaster by the
advertiser. The DAL can contain anything, from bonus content, to games, to response
channels. While there are limitations in what can be currently achieved in this environment,
the ‘microsite’ approach to interactive TV is likely be taken up by many more advertisers
as more bandwidth and greater interactivity of advertising formats comes online.

12. 23/10/2009
[Client Logo] TV: The Internet Is Coming
Appendix:
VOD Landscape (UK focus)
- Broadcasters
- Software
- Hardware

13. 23/10/2009
[Client Logo] TV: The Internet Is Coming
Appendix:
VOD Landscape (UK focus)
However, it is important to understand the marketplace that it will be entering in, and hoping to
revolutionise – that of the IPTV world and digital connectivity. Broad areas competing in this space and key
players trying to bring gain advantage include the following:
Broadcasters
Consumers can now achieve the in home TV experience that they choose, if they pay for it. Services such as
Sky+, BBC iPlayer and Virgin Media in the UK have enabled consumers to watch TV around their lives, never
missing that crucial programme or event. However, they need to pay for it if they want the full fat package
to pause live TV, record series in advance or experience in High Definition. The competition has seen the
broadcasters fight it out to be the tool of choice to watch on demand TV.
Most of these digital broadcast providers have also moved in to the broadband Internet supply business, but
as yet none of them have figured out a successful way to integrate their properties. Even as digital IPTV
services and players develop such as Sky’s skyplayer they are not looking at the online platform to enhance
the broadcast experience but simply looking to get closer to delivering the same broadcast service through
your laptop as through your TV – they seem unable to connect the two.
Green button technology is a digital platform from Sky gives advertisers the opportunity to offer television
viewers additional content lasting up to two hours. Users can press the green button on their Sky remote to
set a reminder for the longer-form programming on the Sky Guide or record it on their Sky+ box. The aim
was to change the perception of interactive.

14. 23/10/2009
[Client Logo] TV: The Internet Is Coming
Software
Web 2.0 and the explosion of broadband across developed markets means that premium, long format
content can be streamed easily over the internet. The revolution started by YouTube has led to the
emergence of players such as Tivo which gives you control over your TV viewing by keeping track of the
latest TV schedule and automatically recording every episode of your favorite shows, even if the day or time
they air changes. Video, music and photos can all be accessed by attaching a TiVo wireless adapter and
connecting your TiVo DVR to your wireless home network. Hulu in the US is another tool which allows users
to enjoy videos on Hulu.com and on 35 other sites. Hulu videos are available on AOL, IMDb, MSN, MySpace,
and Yahoo! in the U.S. as well as a growing network of personal blogs, fan sites, and other Web sites where
users choose to embed the Hulu video player. It offers the freedom to share full-length, full fat content
thanks to the Ad-funded model.
In many ways this is the software providers’ challenge to the broadcaster. If people only select the content
that they want to watch, when they want to watch it then why not access it through the Internet, avoid
subscription charges? As bandwidth continues to evolve at such a rapid pace (who remembers 56k dial-up?!)
in Western markets then the quality will continue to improve and the ability to have a screen in your home
powered by your laptop and not a set-top box will become the more practical option for the masses.
A concept to match and improve the endeavors of Hulu is Project Canvas aiming to break internet-connected
television in the United Kingdom market in Christmas 2010. It is intended to combine broadcast content with
broadband content, delivering both through the television (as distinct from the computer) – but again it is
yet to be seen how it will approach any form of convergence between the two and what the enhanced
offering can be for the end consumer. The clear trend in the Software spectrum seems to be trying to bring
the focus away from our smaller screens back to our larger domestic screens.

15. 23/10/2009
[Client Logo] TV: The Internet Is Coming
Hardware
The contemporary home will see a large TV sitting proudly as the centre of attention, connected to its HD
broadcast box, HD DVD player and top-end games console(s). However, the quest over the past few years
has been to pull this all back to one device. Firstly, the HD DVD capability was won by PlayStation and the
integration of the Blu-Ray player as standard into its 1st gen PlayStation 3. These next generation consoles
including Microsoft’s Xbox 360 and Nintendo’s Wii now offer amazing connectivity, and the Wii has attracted
a much broader ‘gamer’. Now on the more advanced platforms of PlayStation Home and Xbox Live you can
engage with the Internet, shop online, organise digital photos and communicate with other users and access
premium, streamed content. The question is how far away are we from a broadcaster partnering with a
gaming manufacturer to produce a one box which has all of the options? Maybe Microsoft’s deal with Sky
Sports in the United Kingdom and the Microsoft Xbox Natal ‘home entertainment’ system is a step closer to
this. Or potentially technology will evolve to a point where we do not need any form of hardware beyond a
screen that does everything…