Canoe Ventures' David Verklin Seeks to Ignite a Recalcitrant TV Industry and Fire-Up Interactive TV

Can Canoe Ventures overcome years of failed ITV investments and fulfill a 35year old quest to bring interactivity to the television industryInteractive television advertising expenditures are projected to grow from a miniscule 50 million in 2010 to a robust 965 billion in 2020 according to exclusive Jack Myers Media Business Report data See our detailed 20102020 growth data chart below However that growth does not achieve quothockey stickquot proportions until 2017 when it increases from less than 2 billion in 2016 to 35 billion The key question confronting the industry during the next several months will be whether Canoe Ventures will be the organization designated to lead that growth through this decade And if Canoe does not survive and succeed will the growth rate of ITV advertising slow dramaticallyCanoe was funded three years ago by six leading cable multisystem operators MSOs Comcast Time Warner Cablevision Cox Charter and Brighthouse Led by advertising veteran David Verklin httpwwwcanoeventurescomleadershipphp Canoe has focused its substantial economic resources on engineering in an attempt to build an interoperable industry digital infrastructure and create a universal TV industry interactive backbone that can enable immediate consumer response to advertisers39 offerings across a large national footprintVerklin39s task of building an economically and technologically viable national ITV platform has been daunting Not only has he had to quotherd the catsquot as one industry observer commented on MSO incompatibility overcome a community that doubts the sincerity of the cable industry39s commitment and manage his own innate enthusiasm but to date Canoe has been successful only in enabling a requestforinformation RFI platform and coming soon polling voting and trivia While generating significant publicity Canoe has failed to achieve the ambitious goals outlined by Verklin early in his tenure While he continues to be an advocate for both TV interactivity and Canoe his enthusiasm is tempered by reality and even industry supporters for Canoe39s initiatives are reluctant to speak on the recordJacqueline Corbelli founder and CEO of eightyear old BrightLine an agency specializing in ITV by using settop box data to inform develop implement and measure interactive ad campaigns points out that marketers are active advocates for ITV campaigns once they understand the opportunities to build returnoninvestment into their TV campaigns But Corbelli who employs 40 ITV developers agrees with Verklin that adoption is slow as current business models and embedded industry relationships discourage innovation However as digital media expand she believes marketers will increasingly expect consumerresponse opportunities to be available from all their media optionsWhile investing in and supporting Canoe Cablevision has been independently building interactive advertising tools in its New York cable systems under the guidance of Barry Frey who reports significant success among a limited but growing group of advertisersVerklin outlines the Canoe mission as an investment quotto determine whether ITV is one of the ways for programming networks to generate significant incremental revenuesquot He acknowledges that his mission has been a challenging one While he believes ITV quotcould be the next big moneymaker if the networks embrace itquot he wonders if networks and agencies will quotsquander the opportunity by not dealing with the complexityquot of the required development effort quotThis is a sedentary and reluctant marketquot he points outquotIf Myers39 economic projections of nearly 10 billion in 2020 are right or even half right and the economic split is 5050 among programmers and operators it is significant coinquot Verklin observes quotThe challenge for networks is to make the investment as we ramp up What does TV look like in 2015 and 2020 and how much of a threat is the Internet If you are in a business that is growing in low single digits you want to pay attention to advanced TV which is one of few growth opportunities out there Selling linear 30second commercials without advances is a recipe for serious challenge on Wall Street and Madison Avenue The linear 30 has to evolve on TVquotFunding for Canoe is reported to have been renewed for another three years and Verklin39s contract is up for renewal this summerAs of today Canoe39s footprint of EBIF Enhanced TV Binary Interchange Format enabled households is about the same as the subscriber base of Netflix at nearly 20 million Of course Netflix consumers pay an incremental monthly fee while Canoe is dependent on continuing strategic investments from a cable industry that is struggling with quotoverthetopquot competition and resulting subscriber declines Verklin anticipates growth to 30 million homes by the end of this year and he argues that interactivity is a key value proposition for cable and satellite operatorsCurrently three programming networks E Style and AMC are actively involved in selling Canoeenabled ITV campaigns By the end of this month says Verklin there will be seven networks selling ITV applications as Discovery History Bravo and USA ramp up their offerings He hopes Canoeenabled interactivity will be available from 15 to 20 cable networks by the end of the year Such growth will most likely be spurred by Comcast39s NBCU networks By 2015 Verklin believes broadcast networks will also be enabledThe vision of Canoe is to expand its base of cable MSOs and then include Verizon39s FIOS ATT39s Uverse DirectTV and Dish Network quotWe hope they will get into the canoequot quips Verklin quotOur intent and hope is to convince others to join us When ITV is available across the entire spectrum of distributionquot Verklin envisions quotnetworks should be able to have a deterministic vote for American Idol or Dancing with the Stars Tcommerce will incorporate an immediate clicktobuy generated by infomercials direct TV spots and even merchandise from the programming networks and studios themselves There will be a suite of ITV productsquotCanoe39s RFI platform represents a simple product that is sold by existing network sales forces and is purchased by existing agency media buyers The TV screen overlay is a text box with logo that comes from the bottom of the screen three seconds after the start of a commercial providing an offer with a quotyesquot quotnoquot quotexitquot option It39s activated with the existing remote control connects to the cable operator database and allows for mail distribution In the future an email and SMS return path is anticipated The current criticisms of Canoe39s advertising platform include it is too expensive as an incremental addon to existing advertising campaigns the audience footprint now and into the foreseeable future does not represent a scalable business TV salespeople are not the best advocates for ITV nor are they trained in the skills required to adequately represent and manage ITV campaigns Agency TV buyers are not the appropriate targets for advancing arguments for ITV campaigns to corporate chief marketing officers and brand managers who often must be engaged and involved in the decision to approve ITVThe results for the three networks currently deploying RFI are encouraging however says Verklin An online display ad quotclickthroughquot averages 15 or less For ITV the clickthrough is reported to be 4 to 6 times that rate averaging 25 to 10 with some offers generating 15 responseBy the secondhalf of this year Canoe will also offer interactive polling and will also launch quotfun to play trivial applications with social networkingquotAddressable TV advertising often bundled with ITV has also been slow to evolve after more than a decade of investments by Visable World Invidiamp160 Microsoft39s Advertising TV Network Admira and others Canoe has been actively engaged with Visible World and is exploring addressable interactivity delivered based on household demographic and psychographic and regional profilesVerklin argues that quotno one is projecting that large screen video devices will not be in your home in 2015 or 2020 Even George Orwell had a large screen in the home That large screen device will still be referred to as TV It needs to be imbued with targeting and interactivity that consumers and advertisers expect from other platforms TV better have the capabilities that online media deliverquotIf ITV is to become a meaningful industry revenue stream expanded industrywide capabilities and technological compatibility will be essentialIs Canoe essential to this future Certainly cable operators must be committed to interoperability if the ITV industry is to move forward If Canoe fails to achieve that basic goal it could represent a significant setback and would definitely be a PR black mark for the cable industry But the implications may not be as severe as those resulting from the cable industry39s early decisions to slow the introduction of digital settop boxes Since the earliest days of the cable industry MSOs have purposely rejected interoperable set top boxes thereby preventing subscribers from carrying their boxes from one system to another when moving from town to town Interactivity was dealt a major setback when the industry nearly a decade ago opted to reject advanced settop boxes in favor of maintaining socalled quotdumb boxesquot This decision resulted in the failure of many ITV initiatives that had been showing great promise including dynamic ad insertion into VOD content Wink ICTV ACTV OpenTV and Canal Plus From 1999 to 2001 these companies along with Microsoft and several others funded the Forum for Interactive TV Development a quarterly gathering of industry executives attended by more than 2500 executives during that period Full disclosure Jack Myers organized and hosted the Forum Interactive TV initiatives date back to Warner Communications39 QUBE in the 1970s and Time Warner39s Full Service Network in the 1990s both of which failed to meet even the most conservative business goals although technologically they exceeded many current ITV achievementsVerklin defends Canoe as the industry39s answer to past ITV failures quotCanoe is the largest collaborative infrastructure ever conducted by the US cable industry We have achieved a lotquot Confronting his critics he asks quotIn the two years it has taken us to get to this point what opportunities have we missed Has the electronics marketplace taken off without us Has Google TV taken off Has the VOD model evaporated Has ITV lost an advantage to the Internet and made ITV irrelevant How about set top box data amp8211 has the market evaporated We have had a two year enormous infrastructure project We have stuck to our knitting We are experimenting with addressability We created a national interoperability program We are the size of Netflix with far greater growth opportunities What have we missed by taking so long What part of the market opportunity has slipped through our fingers We are in the catbird seat We are humming along with real interactive products We have been talking about ITV since QUBE in 1977 It is in the market today and growingquotAs Verklin looks to the future his role is clear quotI need to convince a recalcitrant TV business there is a 39there there39 I39m asking the networks to sell something they have never sold before We need to ignite the market and it is a challenge Our final piece is marketplace ignitionquot Jack Myers Media Business Report Media Advertising and Marketing Economic Health Report 20102020 amp160 amp160 amp160 INTERACTIVE TELEVISION ADVERTISING REVENUES 000000 amp160 amp160 amp160 amp160 TOTAL amp160 amp160 REVENUES CHANGE amp160 2010 50 15000 amp160 2011 70 4000 amp160 2012 119 7000 amp160 2013 262 12000 amp160 2014 484 8500 amp160 2015 1090 12500 amp160 2016 1962 8000 amp160 2017 3531 8000 amp160 2018 5296 5000 amp160 2019 7150 3500 amp160 2020 9652 3500 amp160 SOURCE Jack Myers Media Business Reportamp160 2011 amp160 amp160 amp160 amp160 amp160 You are receiving this email as a corporate subscriber to Jack Myers Media Business Report Redistribution in any form except among approved individuals within your company is prohibited As a subscriber you have full access to all archives and reports at wwwjackmyerscom If you require your ID and password contact maryannjackmyerscom

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Canoe Ventures' David Verklin Seeks to Ignite a Recalcitrant TV Industry and Fire-Up Interactive TV

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