We’ve all heard that ad dollars are moving online away from traditional media such as television, radio, and newspapers. The numbers don’t lie. Advertising spending in these media over the past two dozen years has plummeted. Will advertisers ever go back to traditional media, and most importantly how can cable operators and telcos offer advertisers more bang for their shrinking buck?

Television, radio, and newspapers were on a very steady growth rate, generally in the mid to high single digits since 1980 with some years (mainly election years) growing at double digits. Then in 2001, everything hit a wall. According to Universal McCann, television (including both broadcast and cable) declined by 9.4%, newspapers by 9.8%, and radio by 7.4%, mostly due to the dotcom bust. Advertising spending in these media have not gone back to their prior rate of growth.

From 2001 to 2005, newspaper ad spending varied from -0.5% to +3.9%.  Then in 2006 it was -1.6% and in 2007 dropped significantly to -9.5%.  Morgan Stanley estimates newspaper ad spending to drop by 5.6% and 4.5% in 2008 and 2009, respectively, and continue to decline thereafter.

Radio rose respectably by 5.7% in 2002, but languished in the 0% to 2% range through 2006. Morgan Stanley estimates radio ad spending to be -2.6%, -3.0%, and 0% for 2007, 2008, and 2009, respectively.

Television has fared better.

Unlike the years before 2001, where you saw nice steady growth, broadcast television growth has fluctuated back and forth since 2001 between positive and negative territory every other year with a high of +10.3% in 2004 and a low of -5.0% in 2007.  Morgan Stanley estimates broadcast television ad spending will be up for 2008 and then down again for 2009.  In the future, we may see these years as an inflection point in broadcast television ad spending.

For the several years prior to 2001, national cable and local cable ad spending grew in the high teens and low twenties in percentage points.  But from 2001 to 2006, while national cable saw some double digit growth years, local cable only saw 5-6% growth.  Going forward, for the next few years, Morgan Stanley estimates national cable will only grow at about 5-6% per year while local cable growth will fluctuate between 0% and 3% – not the double digit growth rate seen before 2001.

At the same time, internet advertising has risen rapidly. Since 2003 internet ad spending has grown from 20 percent to 30 percent per year and is estimated to grow by 21.4% in 2008 and 19.7% in 2009.

This begs the question: What can video service providers do to combat these changes in advertising spending? I’ll explore that topic in upcoming posts.

At the TelcoTV conference this week in Anaheim, RGB Networks will be demonstrating its solutions for telco operators. One of the key products in the RGB portfolio of products for IPTV services on display at the show is the Video Multiprocessing Gateway (VMG), formerly known as the Modular Video Processor.

The VMG is a high density, carrier class, chassis based platform that performs advanced video processing features for bandwidth optimization, video quality of service and targeted advertisement insertion to deliver high quality profitable video services over various Telco access networks.

An important VMG functionality that is going to be demonstrated at the RGB booth will be targeted advertisement as part of MPEG-4 AVC high definition, high quality IPTV service. In the demonstration, the VMG will perform seamless and frame-accurate ad insertion, which is a critical aspect of the ad insertion process. Without it, ad spots can run short or overlap the broadcast content, creating video artifacts or cause more serious video quality problems, such as picture freezes from buffering problems at the set-top box level.

A simpler solution to overcome such problems is to precondition the video content in order to align various video characteristics; however in a broadcast network, preconditioning of ad content or the network stream is not desirable or scalable.

Together with myriad set of H.264 and MPEG-2 video processing features for optimizing bandwidth and seamless frame accurate splicing for targeted advertisement in a high density carrier class platform, the VMG is geared to provide telco operators the capabilities they need to deploy profitable and innovative IPTV based service offerings.

If you are at the TelcoTV show this week, swing by our booth to get a detailed perspective on the VMG’s advanced capabilities.

As Director of Product Marketing at RGB Networks for telecom products and solutions, having a keen interest in following IPTV trends, deployments, challenges and driving appropriate IPTV solutions goes well beyond being a job. The concept of sending video over converged IP networks and watching my favorite videos at any time and on any device has been fascinating to me since the days I developed software for IP routers and switches for transporting data and voice for the internet.

Fast forward and today IPTV as a broadcast and on-demand video service is becoming a reality largely driven by telecom operators that need to compete against cable triple play services.

Not only do I see IPTV evolution unfold but get to shape it in numerous ways.

IPTV deployment and subsequent subscriber growth is however still in its early stages. In a recent study, research group MRG, Inc., says that worldwide IPTV subscriptions stand at about 20 million and are projected to grow at 40 percent annual growth to 89 million by 2012.

In order for the industry to achieve or even exceed this growth rate, what key hurdles will telecom operators face and have to overcome to truly leverage the power of IP and addressability for video delivery?

If telco operators can enable their networks to achieve the following high level goals, they should be able to grow rapidly and deliver on the promise of IPTV services:

• Offer high definition (HD) broadcast and on-demand content at the best quality of experience (QoE) to all or the majority of telco subscriber base.
• Incorporate advertising as part of the IPTV business model and offer video services that are price competitive in order to maximize the ROI.
• Introduce innovative new services delivered to multiple device types.

RGB Networks specializes in offering advanced video processing solutions for cable and IPTV. We focus on solutions that will help operators deliver video at the highest levels of video quality and accelerate the profitability of IPTV services by enabling advanced advertisement solutions.

Stop by our booth at TelcoTV this week and let us demonstrate our knowledge, products and services that let you stay competitive and offer your customers the highest quality solutions.