The media has been awash with stories about the state of the ad market recently, not all have made for comfortable reading…
Take for example the Financial Times’ week-long ‘Media Challenge’ series, which – among other things – examined the sheer scale of the problem facing those broadcasters with a heavy reliance on ad sales. Phrases like ‘plummeting revenues’ and ‘inexorable decline’ littered the FT’s famous pink pages, and were nailed home by PwC’s prediction that the global broadcast TV advertising market will shrink by 13 percent this year (and will continue to contract until 2013).
Elsewhere in the media there was widespread interest in Nielson Co’s latest figures on U.S. ad spending, which slumped by $10.3 billion in the first half of 2009 compared to the same period last year. While there’s a glimmer of hope for U.S. cable operators (which actually saw a 1.5 percent rise in ad revenues), the general outlook for TV ad sales is bleak.
It doesn’t take Einstein to see that broadcasters urgently need to revisit their revenue strategies and look for alternative income streams, but it would be wrong to conclude that the current ad model is completely broken – broadcasters just need to get smarter about how they target consumers.
The problem with traditional TV ads is that they are just like spam. They hit all TVs equally, regardless of whether individual viewers are actually interested in the products or services being promoted. However, unlike spam, TV ads are hugely expensive to produce and distribute. In today’s recessionary times, household brands simply can’t see the ROI in this model.
The future has to be targeted ads. Viewers are making increased use of personalized TV services like video-on-demand, so it’s only natural for them to expect tailored ads too. How far personalization will go is yet to be seen, but it is worth pointing out that the North American cable industry has been relatively quick to adopt ad insertion technologies, allowing them to deliver localized – rather than generic – content. Perhaps this is even one of the reasons why the U.S. cable market has bucked the general industry trend, and actually enjoyed a rise in ad revenues this year.
‘Three screens’ is the Holy Grail of TV. The attraction of being able to watch the same video on the TV, PC and mobile devices is obvious to consumers and service providers alike. While deceptively simple to the layman, actually accomplishing it is fraught with complications for service providers in today’s multi-codec world. While more and more content is encoded using the bandwidth-thrifty MPEG-4/H.264 codec, MPEG-2 remains predominant, particularly when it comes to media libraries. Transcoding is a straightforward method for converting content from one codec to another to accommodate the requirements of the particular distribution network, however, high cost remains a stumbling block. The purchase price of today’s single channel transcoders might seem affordable at first glance, but when it comes to scaling a three screens deployment from a handful of channels to a meaningful line-up, the costs grow dramatically. Further complicating matters are the associated costs of single channel transcoders—equipment racks, power consumption, complicated network management system, etc.—which make scaling a three screens service a money losing proposition.
Density is the answer—the more program streams that a single device can transcode, the lower the all-important ‘cost-per-stream.’ Process enough streams in one device, and integrate that capability with a number of other critical video processing functions to further lower cost and complexity, and the cost to scale a three screens deployment goes from outrageous, to affordable, to a revenue-generating opportunity that cannot be dismissed.
With more and more subscribers embracing the benefits of watching television where and when they want, operators would be well advised to explore a single, high-density solution for the delivery of a three screen reality. If you’re at this year’s IBC, please come by our stand—#5.C14—and learn about RGB’s new content repurposing solution, an integrated approach to transcoding that can help save you time, money and some very serious headaches.